Oil prices near $100 as Iran-US ceasefire remains uncertain
What's the story
Oil prices rebounded on Thursday, after a steep 15% drop in the previous session. The recovery comes amid uncertainty over the West Asia ceasefire and restrictions around the Strait of Hormuz. Despite hopes for de-escalation, persistent regional tensions and attacks on oil infrastructure are likely to keep prices high and markets volatile. Brent crude oil prices increased by $2.6 or 2.74%, to $97.35 a barrel while US West Texas Intermediate (WTI) rose by $3.02 or 3.2%, to $97.43 earlier today.
Market concerns
Uncertainty looms over US-Iran ceasefire
The two-week ceasefire between the US and Iran remains uncertain, with ongoing restrictions around the Strait of Hormuz. This strategic waterway connects oil exports from major Gulf producers such as Iraq, Saudi Arabia, Kuwait, and Qatar to global markets. It usually accounts for about 20% of global supply. However, Israel's continued strikes on Lebanon have raised doubts over a lasting peace agreement.
Infrastructure risks
Iran's regional strikes raise doubts about durability of ceasefire
Despite the ceasefire, Iran has allegedly targeted sites in neighboring countries, including a pipeline in Saudi Arabia that bypasses the Strait. Kuwait, Bahrain, and the UAE have also reported missile and drone strikes. The durability of this ceasefire is uncertain especially with Israel's military actions against Hezbollah in Lebanon and continued attacks on energy facilities adding to market uncertainty.
Future outlook
Global brokerage predicts oil prices to remain elevated
Experts believe that the oil market could be heading toward a structurally higher price regime. In a base case scenario assuming de-escalation of the Iran war, global brokerage Macquarie expects prices to remain elevated with Brent supported in the $85-$90 range gradually moving back toward $110 as flows through the Strait of Hormuz normalize only slowly.