Iran Conflict Threatens Oil Recovery as Prices Surge

The latest round of attacks and retaliation between the US and Iran has dented hopes for the full reopening of the Strait of Hormuz, which is a critical waterway for global oil supplies. Brent crude futures gained 1% to $78.88 a barrel as of 0421 GMT, while U.S. West Texas Intermediate (WTI) crude gained almost the same amount to $74.34.

In a note on Wednesday, Goldman Sachs said it sees two-sided risks to Persian Gulf oil flows and near-term prices. The bank still expects Persian Gulf flows to return to normal by the end of July if certain conditions are met, including the 60-day negotiations continuing and the waiver on Iranian oil being reinstated.

However, Goldman also warned that if these conditions fail, attacks on tankers escalate, and a US blockade of Iranian oil is implemented, Persian Gulf flows may decrease further. Currently, Persian Gulf oil exports are running at 71% of normal levels, down from 83% of pre-war flows reached within the first 10 days after Hormuz reopening in June.