Major attacks on maritime shipping initiated by Iran and the US spark serious supply concerns
Oil prices retreated on Thursday as investors braced for more severe supply disruptions following the largest attacks on maritime shipping since the conflict began six months ago; however, Brent crude held above $100 per barrel.
Brent crude futures fell 0.7% to $100.50 per barrel as of GMT 06:19, while WTI crude dropped 0.5% to $95.58.
With no lasting agreement reached to halt the attacks and hostilities resuming later in the month, Brent prices have surged nearly 30% from the lows seen in early August.
Iran announced on Wednesday that it had attacked 10 ships near the Strait of Hormuz after the US sank five Iranian oil tankers; Iran's Islamic Revolutionary Guard Corps stated they would escalate their response to future attacks.
The resumption of hostilities between the US and Iran, following about a month of relative calm, has once again raised the geopolitical risk premium on crude oil.
Oil flows through the Strait of Hormuz remain well below pre-war levels.
Pressure on alternative routes for Gulf oil exports is also mounting as pro-Iran Houthi militants step up attacks on Saudi Arabia, threatening crude oil shipments via the Red Sea.
While fears of a prolonged and more severe supply disruption in the Gulf have pushed Brent crude above $100, analysts note that the sustainability of this rally will depend on China.
China, the world's largest crude oil importer, has revitalized physical crude markets by ramping up purchases in recent weeks following months of sluggish demand.
Meanwhile, if the recovery in Chinese buying continues, the impact of potential supply disruptions is likely to intensify and drive prices higher; however, a pullback in imports could limit market gains.
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