Middle East Tensions Weigh on Oil Prices Despite Alternative Routes

Oil prices declined on Thursday as tankers continued to navigate through Middle East conflict zones despite escalating tensions. Brent futures fell $0.79, or 0.9%, to $87.30 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped $0.76, or 0.9%, to $83.70 a barrel.

The price drop comes after a sharp spike in the previous session, with Brent settling up 7.91% and WTI up 6.56%. This is one of the largest increases during the Iran war, reversing a 5% plunge on Tuesday after a pause in hostilities.

Tony Sycamore, an IG market analyst, noted that while overall volumes are reduced, oil continues to leak out of the region through multiple channels. He said additional workarounds are being explored, and the longer this situation persists, the more these alternative routes and methods will erode Iran's leverage over the Strait of Hormuz.

The Strait of Hormuz is the world's most important oil shipping route, through which around a fifth of global oil and gas flows previously passed. It has been largely blocked since the start of the U.S.-Iran war in February despite efforts to reach a diplomatic breakthrough on the passage of ships through the strait.