Oil Pressured by US-Iran Peace Optimism
Oil prices fell more than 3% in trading on Friday (June 26th) and are still on track for a third consecutive weekly decline. The pressure arose as shipping traffic through the Strait of Hormuz began to improve, while optimism over an interim peace deal between the United States and Iran continued to outweigh renewed concerns following an attack on a cargo ship near Oman.
Brent for August delivery fell 3.4% to US$72.70 per barrel in the European session. Meanwhile, West Texas Intermediate, or WTI, fell 3.5% to US$69.40 per barrel. For the week, both major oil contracts are on track for a decline of around 9%, extending the pressure that began after the initial US-Iran agreement last week.
Oil prices have now erased most of the gains made since the beginning of the Iran conflict. Previously, prices had surged sharply when the risk of war peaked and the market worried about supply disruptions from the Middle East. However, after peace talks resumed and the Strait of Hormuz reopened, the war risk premium began to recede from oil prices.
In the previous session, Brent and WTI rose more than 2% after a projectile struck a cargo ship passing through the Strait of Hormuz. The incident rekindled concerns about the security of one of the world's most important energy routes. The attack also prompted the International Maritime Organization (IMO) to suspend efforts to facilitate safe passage for ships and crews in the region.
United States officials later claimed Iran had fired on the ship, raising questions about the robustness of the initial peace agreement between Washington and Tehran. However, the market appears to be more focused on the fact that oil shipments through the Strait of Hormuz have increased to their highest level since the conflict began.
ING analysts cautioned that much of the current increase in shipping flows stems from vessels previously stranded in the Persian Gulf. Therefore, the market could still see a decline in shipping flows once the stranded vessels have left the region. This means that supply normalization is not guaranteed to proceed smoothly and steadily in the short term.
Nevertheless, the underlying market sentiment remains bearish. Brent has fallen significantly from its peak above US$90 per barrel at the start of the month, as traders grow more confident that a broader US-Iran deal could restore oil flows from the Gulf region. If Hormuz traffic continues to improve and there is no new escalation, pressure on oil prices is likely to persist.
However, geopolitical risks have not completely disappeared. The ship attack near Oman shows that the security of the Hormuz passage remains fragile, and new disruptions could again raise the oil risk premium. Given these conditions, the short-term direction of oil prices will still be determined by two main factors: the speed of normalization of Hormuz flow and the sustainability of the US-Iran peace deal. (arl)
Source: Newsmaker.id
