Oil slipped in Asian trade on Thursday following a pronounced rally the day before, as market participants took profits and considered fresh signs of geopolitical strain alongside indicators of tightening physical supplies.
At 20:50 ET (00:50 GMT), Brent Oil Futures for September delivery was trading down 0.9% at $89.92 per barrel, while West Texas Intermediate (WTI) futures were down 0.6% at $83.94 per barrel.
The previous session saw steep gains: Brent jumped nearly 8% and WTI closed about 6.6% higher. Those increases were driven primarily by renewed concerns about potential supply disruptions after a round of hostile actions tied to Iran.
Iran launched ballistic missiles toward U.S. forces in the Middle East, according to reports, and those missiles were intercepted. In response to the attacks Washington said were linked to Iran-backed militias, U.S. and Saudi forces carried out strikes against those groups in Iraq. U.S. political leadership signaled the prospect of further military pressure: President Donald Trump told Fox News on Wednesday that Iran would be hit very hard following what was described as a missile attack on U.S. forces in Jordan.
Observers said the escalation has diminished hopes for a diplomatic resolution between Washington and Tehran. The conflict has widened beyond the Persian Gulf region: Egyptian authorities reported drone strikes against two natural gas vessels operating off the country's coast, and Yemen's Iran-aligned Houthi group has stepped up attacks on commercial shipping and on energy-related targets linked to Saudi interests around the Red Sea and the Bab el-Mandeb Strait.
The Houthis have sought to impose what they describe as a naval blockade and have discussed charging transit fees for vessels seeking safer passage, raising fresh concerns about higher shipping costs and rising insurance premiums. The Bab el-Mandeb is a critical maritime chokepoint that connects the Red Sea with the Gulf of Aden and handles millions of barrels of crude and refined products each day. Those Red Sea disruptions are occurring while traffic through the Strait of Hormuz remains well below normal levels.
Adding to the supply-tightening narrative, the U.S. Energy Information Administration reported a much larger-than-expected decline in crude inventories last week. U.S. crude stocks fell by 7.2 million barrels, reaching their lowest level since 2018, a data point that reinforced expectations of leaner near-term supplies in the world's largest oil consumer.
For now, markets are balancing the immediate geopolitical risk premium against profit-taking after a sharp price surge, with traders watching for further developments on both the security and inventory fronts.
Key points
- Brent fell 0.9% to $89.92 and WTI slipped 0.6% to $83.94 as of 20:50 ET (00:50 GMT).
- Brent had risen nearly 8% and WTI gained 6.6% the previous session on renewed Iran-related supply fears.
- An unexpected 7.2 million-barrel draw in U.S. crude inventories tightened near-term supply expectations.
Market impacts
- Energy markets remain sensitive to military developments and shipping disruptions.
- Shipping, insurance and logistics sectors face pressure from increased security risks in key chokepoints.
- Refiners and downstream markets may contend with higher feedstock costs if disruptions persist.