Oil Continues to Fall, Conflict Pause Eases Supply Concerns
Oil prices continued to weaken on Tuesday (July 28th) after a pause in fighting between the United States and Iran persisted. This situation raised hopes for a de-escalation of the Middle East conflict, which had previously disrupted global energy supplies.
Brent oil for September delivery fell 3.71% to US$85.08 per barrel. Meanwhile, West Texas Intermediate (WTI) oil fell around 3% to US$80.11 per barrel.
Iran denied having agreed to a 10-day ceasefire with the United States, but attacks have temporarily subsided. The market believes the pause reduces the likelihood of major attacks on energy facilities and civilian infrastructure in the near future.
However, supply risks remain high as the dispute over the Strait of Hormuz has the potential to reignite conflict. Goldman Sachs estimates Brent could fall towards US$80 per barrel by the end of the year if the waterway is fully reopened, but disruptions in the Red Sea and attacks on Saudi Arabian oil facilities remain upside risks.
Market Impact
The decline in oil prices could help ease inflationary pressures and reduce the likelihood of tighter monetary policy. This could potentially support the stock and gold markets, but weigh on energy company shares. Oil could surge again if the conflict escalates or the strategic shipping lane in the Strait of Hormuz is again disrupted.
Source: Newsmaker.id
