Oil recovers, supply risks remain high - Fragile US-Iran ceasefire and Hormuz keep markets tense
Oil prices rose on Thursday as doubts over a fragile two-week ceasefire in the Middle East raised concerns that energy flows through the vital Strait of Hormuz would remain limited.
Brent crude futures rose $1.96 to $96.71, while U.S. crude rose $2.60 to $97.01 a barrel.
Analysts said market participants are reluctant to fully discount geopolitical risk and there is no clarity on what negotiations between the US and Iran would mean for oil flows. “The chances of a meaningful reopening of the Strait of Hormuz in the near future appear slim,” they said, predicting continued volatility in oil prices.
This vital waterway connects supply from Gulf producers such as Iraq, Saudi Arabia, Kuwait and Qatar to global markets from where about 20% of global oil and gas supply is transported.
The implementation of the ceasefire is in question as Israel continues to attack Lebanon, prompting Iran to suggest it would be "unreasonable" to continue talks to reach a permanent peace agreement.
The carriers also said they needed more clarity on the terms of the ceasefire before resuming transit through the Strait of Hormuz. Iran has issued maps to guide ships and has designated safe routes for passage in coordination with the country's Revolutionary Guard, Iranian media reported.
Regional oil facilities also remain under threat, with Iran striking neighboring countries after the ceasefire, including a pipeline in Saudi Arabia that is used to bypass the blocked Strait of Hormuz, according to an oil industry source.
Kuwait, Bahrain and the United Arab Emirates also reported missile and drone attacks. Meanwhile, Goldman Sachs cut its second-quarter forecasts for Brent crude to $90 and for U.S. crude to $87.
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