Crude oil prices experienced a decline following statements from US President Donald Trump, who indicated that Washington would refrain from military action against Iran prior to the November 3 midterm elections. This announcement alleviated concerns regarding potential supply disruptions and threats to energy infrastructure. In a recent post on Truth Social, Trump asserted that the United States is engaged in fruitful discussions with Iran and emphasised that the Strait of Hormuz continues to be under US control. He reiterated that Iran would not be permitted to possess a nuclear weapon and asserted that oil shipments through the strategic waterway were occurring at unprecedented volumes. Brent crude experienced a decline of 1%, settling at $103, whereas West Texas Intermediate decreased by 0.75%, reaching $90.5. In the previous session, Brent crude futures settled at $104.28 a barrel, reflecting an increase of $4.08, or 4.1%. Meanwhile, US West Texas Intermediate crude rose by $3.21, or 3.6%, to close at $91.49. Both contracts experienced an increase exceeding $5 per barrel at one juncture, with Brent reaching its peak level since September 29.
In a recent post on Truth Social, Trump asserted that the United States is engaged in fruitful discussions with Iran and emphasised that the Strait of Hormuz continues to be under US control. He reiterated that Iran would not be permitted to possess a nuclear weapon and asserted that oil shipments through the strategic waterway were occurring at record volumes. Trump’s remarks followed an increase in assaults on oil and commercial tankers within this vital shipping corridor. According to the UK Maritime Organization, at least nine attacks were reported in the Strait of Hormuz and the Persian Gulf during the first seven days of October, which already constitutes 50% of the total attacks recorded in September. Meanwhile, The New York Times reported that the US had prepared plans for a three-day military operation against Iran, targeting drone and missile arsenals, energy facilities, and other sites. Oil prices continued to find support from the persistent conflict between Saudi Arabia and the Houthis in Yemen, coupled with a significant increase in tanker freight rates.
Iran’s Fars news agency has indicated that multiple “heavy explosions” occurred in the Strait of Hormuz late Thursday, following the detonation of mines that targeted oil tankers navigating the southern route of the waterway. The report referenced unnamed sources from Iran’s military, and there was no independent verification of the incident. Traders were closely observing Hurricane Isaias, anticipated to make landfall along the US Gulf Coast late Friday or early Saturday. Alabama, Mississippi, and the Florida Panhandle represent regions that face significant risk. The storm has disrupted approximately 1.3 million barrels per day of oil supply, accounting for over 60% of the region’s output, rendering it inaccessible. “We simply don’t know how to model the endgame,” analysts stated, emphasising the uncertainty regarding the potential evolution of the conflict. When the conflict began, the bank had assumed there were economic thresholds the US administration would not cross. Six months into the war, JPMorgan indicated that numerous thresholds had been surpassed, yet a definitive exit strategy remained elusive. The risk of further supply disruptions has also heightened the likelihood of elevated oil prices.
Daan Struyven stated that recent attacks have demonstrated the potential for disruptions to shipping to proliferate and intensify. Goldman Sachs has delineated a scenario wherein oil prices may ascend to $120 per barrel should assaults on vessels in the Middle East escalate. If exports return to normal, the bank anticipates that oil prices will trend back toward $80 a barrel. Struyven indicated that risks associated with shipping have emerged as a significant factor influencing oil prices. Goldman Sachs anticipates “meaningful upside to crude oil prices” and also projects an increase in natural gas and refined product prices. Struyven noted that supply shocks in petrol and fuels are more significant than those observed in the crude market.
