Crude Oil Prices Plummet as Middle East Tensions Ease

Crude oil prices plummeted today as tensions in the Middle East eased. The US and Iran put off further attacks against each other for a third day, and Iran signaled it would refrain from any retaliation as it negotiated with Oman over the Strait of Hormuz. President Trump said that the US paused Iran strikes to give peace talks a chance.

However, tensions remain high in the region, particularly since the US maintains its blockade of Iranian oil shipments in the Persian Gulf. Houthi militants in Yemen claimed to have struck facilities linked to Saudi Aramco in the Red Sea port towns of Jizan and Yanbu on Saturday. The Strait of Hormuz has been effectively shut off by the war, which is tightening global crude oil supplies.

The International Maritime Organization warned that it's too dangerous to cross the Strait of Hormuz at the moment, and visible transit through the strait has fallen sharply as Iran continues targeting tankers attempting to transit it. Crude prices also have support from Ukraine intensifying drone attacks on Russian oil infrastructure.

Russian crude production fell to 8.928 million bpd in June, the lowest in 2.5 years, according to OPEC data. Ukrainian forces have attacked Russian fuel-producing facilities more than 50 times this year, hitting at least 24 of Russia's 34 largest refineries. The strikes have deepened a nationwide gasoline shortage, with several major refineries shut down and the government banning almost all gasoline, jet fuel, and diesel exports.

Data compiled by Bloomberg show the four-week average of Russian crude exports rose to 4.13 million bpd through June 28, the highest since Russia invaded Ukraine in 2022. OPEC delegates said on May 14 that the cartel aims to continue a series of oil quota increases over the next few months.