Oil prices increased about 1% on Thursday following an incident where a cargo vessel was struck by an unknown projectile near Oman. This event sparked new worries about the timeline for Middle Eastern oil flows returning to levels seen before the U.S.-Israel war on Iran. Brent futures rose by $0.93, or 1.3%, to $74.67 a barrel, while U.S. West Texas Intermediate (WTI) crude saw a $1.16, or 1.7%, increase to $71.50.
This uptick in prices occurred despite earlier optimism that had seen crude futures fall to their lowest levels since February 27, the day before the war began. That optimism stemmed from numerous vessels passing through the Strait of Hormuz, with U.S. Energy Secretary Chris Wright stating on Wednesday that flows were near pre-war levels. However, he also noted that full normalization would take a few weeks due to the need for mine clearance in the strait.
The attack near Oman injected new uncertainty, highlighting the fragility of shipping confidence despite the agreement between the U.S. and Iran to end the war and allow traffic resumption. UBS analyst Giovanni Staunovo commented that while outbound flows from the Gulf have largely increased, a significant rise in inbound flows requires robust safety assurances and mine clearance to stabilize insurance premiums.
UBS has revised its Brent price forecasts downward, expecting $85 per barrel for both end-September and end-December, and $80 per barrel for end-March and end-June 2027. China is anticipated to remain the primary buyer of Iranian crude due to existing EU and British sanctions on Iranian oil and vessels. The initial agreement between the U.S. and Iran initiated a 60-day negotiation period for more complex issues, such as Iran's nuclear program, with assurances that oil would continue to flow through the Strait even if the deal faltered.
