Oil Rises Slightly, Israel-Iran Pulls Brakes on Escalation
Oil prices rose slightly on Monday (June 8th) after Israel and Iran signaled they would refrain from further escalation following a day of exchanges of fire. WTI rose 0.8% to close at around US$91.30/barrel, while Brent gained 1.3% to US$94.25/barrel. Despite an intraday surge, the rally subsided as the market understood that both sides were not willing to escalate the conflict.
Israeli Prime Minister Benjamin Netanyahu said Israel was "holding fire" on Iran for the time being but would respond strongly if Iran attacks again. The statement echoed the tone of Iranian media suggesting a hold on further action. Investors considered this development significant because retaliatory attacks in recent days had threatened talks aimed at ending the war and reopening the Strait of Hormuz.
US President Donald Trump said the two countries were moving toward an immediate ceasefire, but stressed that the agreement could fail if "stupidity or ignorance" got in the way. For the market, comments like these help ease the "war premium," but they aren't enough to eliminate the risk premium, as the diplomatic situation remains vulnerable to further headline changes.
Interestingly, despite the escalation, oil prices remain below US$100. This suggests the market believes the worst impact of supply disruptions has been avoided, compared to the peak of the conflict when Brent neared US$130. However, supply risks have not disappeared, as the Strait of Hormuz remains nearly closed, restricting the flow of oil, petroleum products, and gas to global markets.
Elsewhere, the Houthi group in Yemen has announced it will ban Israeli ships from the Red Sea. However, industry participants believe the additional impact will be limited, as many ships are already avoiding that route. This means the market is more focused on Hormuz as the main risk hub than the Red Sea.
From a maritime security perspective, US Central Command said it disabled a tanker in the Gulf of Oman suspected of attempting to reach an Iranian port. The ship was previously reported to have caught fire and was not carrying cargo. The US also stated that it has diverted 134 vessels since it began enforcing its blockade of Iranian ports in early April, confirming that pressure on physical flows remains a major factor in price formation. (arl)
Source: Newsmaker.id
