Oil prices moved slightly lower on Thursday after rising for three consecutive sessions.
Investors continued to assess the risks from ongoing US military operations against Iran and the possibility of extended disruption to shipping through the Strait of Hormuz.
Brent and WTI Oil Prices Edge Lower
At 06:03 ET, or 10:03 GMT, September Brent crude futures fell by 0.5% to $84.52 per barrel.
Meanwhile, West Texas Intermediate crude futures declined by 0.2% to $79.43 per barrel.
Despite the modest pullback, both major oil benchmarks remained well above their levels from the previous week.
Oil Rally Followed Renewed Iran Conflict
Brent and WTI prices climbed almost 10% to one-month highs at the beginning of the week after the conflict involving Iran intensified again.
The renewed hostilities increased concerns that oil and natural gas shipments through the Gulf could face further disruption.
As a result, geopolitical risk continues to provide support for crude prices even after the latest decline.
Strait of Hormuz Remains the Main Supply Risk
Markets remain focused on the security of the Strait of Hormuz.
Around one-fifth of global oil and liquefied natural gas shipments normally pass through the strategically important waterway.
Any prolonged disruption could restrict global energy supplies and place additional upward pressure on prices.
US Launches New Strikes Against Iran
The recent oil-price gains followed another wave of US strikes against Iranian military targets on Wednesday.
Washington said the operation targeted facilities connected to attacks on commercial vessels.
US officials said the strikes were intended to reduce Iran’s ability to threaten maritime traffic across the Gulf.
Iran Warns of Further Energy Disruptions
Iran described the confrontation with the United States as an existential conflict.
Tehran also warned that regional energy exports could face additional disruption if military operations continue.
The renewed fighting has erased much of the optimism that followed the temporary reduction in tensions last month.
Lower Inventories Increase Market Vulnerability
ING analysts warned that any fresh supply disruption would arrive after substantial inventory declines during the second quarter.
Lower stock levels could make the oil market more sensitive to interruptions in Gulf exports.
In addition, releases from global strategic petroleum reserves are expected to end within the coming weeks.
Those emergency releases have helped support supply and limit price increases in recent months.
Jefferies Expects Tensions to Persist
Jefferies analysts believe the current period of escalation could continue for several weeks.
Although they do not necessarily expect the conflict to develop into a full-scale war, they believe shipping through the Strait of Hormuz could remain restricted.
Such conditions would likely keep upward pressure on crude oil prices.
US Crude Inventories Decline
The US Energy Information Administration reported that crude oil stockpiles fell by 1.7 million barrels during the week ending July 10.
The decline was broadly in line with market expectations.
Gasoline inventories also dropped by 1.5 million barrels as demand remained strong during the peak summer driving season.
However, distillate stockpiles unexpectedly increased by 4.6 million barrels.
IEA Warns of a More Uncertain Oil Outlook
The International Energy Agency said oil flows through the Strait of Hormuz had partially recovered during June.
However, renewed hostilities in July have increased uncertainty around future supply conditions.
The agency warned that additional disruption could prevent the oil market from returning to an expected surplus in 2027.
For now, oil prices remain supported by geopolitical risk, tighter inventories, and uncertainty surrounding one of the world’s most important energy shipping routes.
