Oil prices edged lower on Thursday as traders assessed the escalating conflict between the United States and Iran and the potential risk of disruptions to energy supplies moving through the Strait of Hormuz.

Despite the decline, oil prices remained close to one-month highs as geopolitical tensions in the Gulf showed no signs of easing.

Oil Prices Retreat After Early Gains

As of 08:08 GMT, Brent crude futures were down $0.58, or 0.68%, at $84.37 per barrel. U.S. West Texas Intermediate crude fell $0.18, or 0.23%, to $79.42 per barrel.

Brent had gained nearly $1 earlier in the session, while both benchmarks continued to trade near their highest levels in a month.

The price action suggests that the market has not entered panic mode, although a significant geopolitical risk premium remains due to the possibility of supply disruptions.

U.S.–Iran Conflict Continues to Escalate

The United States struck Iran’s coastal defence systems and missile sites after reimposing a naval blockade on Iranian ports.

Iran warned that it could further restrict regional energy exports and declared the Strait of Hormuz an inviolable “red line.”

The escalation followed the collapse of a fragile truce reached in June, reviving concerns that the conflict could return to a full-scale confrontation.

Vessel Traffic Through the Strait of Hormuz Declines

The Strait of Hormuz is a critical transit route for global oil and liquefied natural gas supplies. Before the conflict began, the waterway handled approximately one-fifth of daily global oil and LNG trade.

Following the reinstatement of the U.S. blockade, vessel traffic through the strait declined. Only seven vessels crossed on Wednesday, compared with 13 vessels the previous day.

However, shipping activity has not stopped completely. Oil tankers are still passing through the strait, although in smaller numbers. This has kept markets cautious rather than triggering an immediate and dramatic surge in oil prices.

Risks Could Spread to Bab el-Mandeb

Analysts have warned that Iran could use its Houthi allies in Yemen to increase pressure on the Bab el-Mandeb Strait, the gateway connecting the Red Sea with major international shipping routes.

If both the Strait of Hormuz and Bab el-Mandeb face significant disruption, two of the world’s most important energy transit routes could be placed at risk simultaneously, sharply increasing concerns over global supply shortages.

Some analysts believe that prolonged disruptions could push oil prices toward $90–$95 per barrel, with the possibility of testing $100 per barrel. However, this remains a risk scenario rather than a confirmed market outcome.

Other Risks Facing the Oil Market

Outside the Middle East, Ukraine said its Security Service and navy had struck two Russian “shadow fleet” tankers with naval drones in the Black Sea.

The development adds another layer of risk to global energy transportation, which is already under pressure from escalating tensions in the Gulf region.

Conclusion

Oil prices eased as markets had not yet seen a complete disruption of energy flows through the Strait of Hormuz. However, declining vessel traffic, escalating U.S.–Iran tensions, and the possibility of the conflict spreading to Bab el-Mandeb continue to keep oil prices near one-month highs.

The next major move will depend largely on whether shipping activity remains operational or whether significant restrictions emerge along these critical maritime routes.

Source: Reuters