Crude Oil Prices Plummet on Increased Strait of Hormuz Traffic

Crude oil prices dropped on Thursday after a brief overnight advance, as tensions in the Middle East continue to impact global markets. The September WTI crude oil (CLU26) price closed down -0.87 (-1.03%) on Thursday.

The fall in prices came despite initial gains following a drop in the dollar index ($DXY) to a 6-week low, as well as ongoing hostilities in the Middle East that are underpinning crude prices.

However, signs of increased oil tanker traffic through the Strait of Hormuz and diplomatic efforts to resolve tensions between the US and Iran contributed to the price decline. Pakistan's Foreign Ministry said negotiations between the two countries are 'ongoing' to restore stability in the region.

US Central Command launched airstrikes against dozens of military targets in Iran on Thursday, aiming to degrade its ability to threaten US troops. Iranian Deputy Foreign Minister Gharibabadi stated that Oman's proposal for a route through the Strait of Hormuz would not address Iran's concerns and must have 100% control over the inbound passage and part of the outbound channel.

The increase in crude supplies in China may also reduce Chinese crude purchases in the near term, while Ukraine's intensification of drone attacks on Russian oil infrastructure has supported prices. However, robust Russian crude exports are adding to global oil supplies, which is bearish for prices.