Gulf Tensions Subside as Oil Prices Decline

Oil prices declined on Thursday as investors shifted their focus from escalating tensions in the Gulf region to supply flows through key chokepoints. Brent futures fell by $0.96 or 1.06% to $89.78 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped by $0.64 or 0.76% to $83.82 a barrel.

The price spike on Wednesday was largely attributed to U.S. President Donald Trump's threat to hit Iran 'very hard' after an Iranian missile attack on a U.S. base in Jordan. However, Lin Ye, vice president of commodity markets at Rystad Energy, believes that the market has fully priced in this threat and is now considering the possibility that Trump may not follow through.

The market's attention is also focused on supply flows from the Gulf region, with Rystad Energy estimating that around 13 million barrels per day of oil are still reaching markets despite the near shutdown of the Strait of Hormuz. Even after the Iran-aligned Houthis imposed a naval blockade on Saudi Arabia in the Red Sea, some cargoes have flowed to markets through alternative routes.