Oil Prices Correct, Risk of War Remains
Oil prices weakened more than 1% in trading on Tuesday (July 21st), as the market weighed the possibility of mediation between the United States and Iran. Brent fell 1.4% to around US$88.01 per barrel, while the nearest WTI contract fell 1.1% to US$82.29 per barrel.
Pressure on oil arose after reports that mediators proposed a 10-day ceasefire. The proposal is expected to pave the way for salvaging the interim US-Iran deal signed in June.
However, geopolitical risks have not completely subsided. The United States continues its attacks on Iran, while Iran retaliates by attacking US military assets in the Middle East. President Donald Trump has also warned of retaliation after several US troops were killed.
Tensions in global energy routes also remain high. A tanker in the Strait of Hormuz was reportedly hit by an unidentified projectile, forcing the crew to abandon ship and board lifeboats. Shipping traffic through the strait has also continued to decline following the latest attacks by the US and Iran.
An additional risk comes from the Iran-backed Houthi group in Yemen. The Houthis have threatened to impose a naval blockade on Saudi Arabia, which could open a new front in the conflict and threaten energy supplies and global trade beyond the Gulf region.
As a result, oil prices remain potentially volatile. Hopes of a ceasefire may curb price increases in the short term, but attacks in the Strait of Hormuz and the threat of a Saudi blockade remain significant risks. If supply disruptions worsen, Brent could strengthen again, while energy inflation could pressure stocks and support the US dollar. (arl)
Source: Newsmaker.id
