Prices fell as profit-taking and investor caution persisted, but geopolitical risks remain
Oil prices declined on Thursday as investors assessed the risks of a new wave of US attacks on Iranian military facilities, fueling fears of a full-scale conflict and supply disruption in the Strait of Hormuz.
After the US attacked Iranian coastal defenses and missile bases on Wednesday, Tehran threatened to further cut regional energy exports, saying it was in an "existential war" with America. The US reimposed a naval blockade on Iran, restricting ship passage.
After initially rising for a fourth consecutive session, Brent crude futures fell 44 cents, or 0.52%, to $84.51 a barrel as of 06:05 GMT. WTI crude futures also fell 23 cents, or 0.29%, to $79.37 a barrel.
Brent had gained about $1 earlier in the session, and both contracts remained near their one-month highs.
Oil prices have risen this week as supply disruptions in the Strait of Hormuz deepened.
Geopolitical risks continue to strongly support oil; investors are taking a wait-and-see approach. The focus is on whether there will be a tangible disruption to oil flows and how both the US and Iran will respond in the coming days.
The number of ships passing through the Strait of Hormuz decreased on Wednesday, the first day after the US reimposed its naval blockade on Iran. Seven ships passed through on Wednesday, compared to 13 the previous day.
Hostility between Iran and the US flared up again last week, breaking the fragile ceasefire reached in June after months of conflict.
Analysts say Iran has signaled it could use its Houthi allies in Yemen to close the Bab el-Mandeb Strait to the Red Sea, thus opening a new front against Washington and jeopardizing one of the world's most vital energy arteries.
More complex operations increase market anxiety. Worryingly, renewed disruptions to oil supply amid large inventory reductions throughout the second quarter are making the market even more vulnerable.
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