Oil prices fell as traders assessed that the U.S.-Iran conflict would remain limited in scale, easing concerns about renewed attacks on energy infrastructure.
West Texas Intermediate (WTI) crude dropped 2%, settling near $72 per barrel, while Brent crude settled near $76 per barrel after a 5.2% gain on Wednesday.
Following a second consecutive day of U.S. military strikes against Iran, shipping through the Strait of Hormuz nearly ground to a halt, further destabilizing an already fragile ceasefire between the two nations.
However, the market found some relief as U.S. strikes did not target Iranian energy infrastructure, coupled with earlier comments from U.S. President Donald Trump expressing doubt that a return to full-scale war was likely. This has spurred speculation that shipping traffic could resume soon.
Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, noted, "The airstrikes appear relatively measured. Investors still expect a gradual return to market normalcy. Recent developments may delay that expectation but have not overturned it entirely."
After a series of attacks on commercial vessels by Iran, shipowners are divided on whether to continue transiting the Strait of Hormuz.
Goldman Sachs stated that recent attacks in the Strait of Hormuz indicate the primary constraint on a rapid recovery of freight volumes through the strait is Iran's willingness to permit vessel passage, rather than shipping capacity itself.
The investment bank added that disruptions to Strait of Hormuz transportation could slow the region's production recovery.
Brent crude for September delivery fell 2.2%, settling at $76.30 per barrel, having earlier climbed to $79.25.
WTI crude for August delivery declined 2%, settling at $72.08 per barrel.
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