Oil Recovers After Fall, Hormuz Still Unresolved
Oil prices rebounded after posting their biggest daily drop since April 2020, as the Strait of Hormuz remains largely blocked and regional tensions test the resilience of the fragile Middle East ceasefire.
Brent rose to around US$97 per barrel after falling 13% on Wednesday, while WTI also held around US$97. Iran's semi-official Fars news agency reported that tanker traffic was halted following the Israeli attack, but US Vice President JD Vance stated there were signs the strait was beginning to reopen.
Disruptions in the waterway are a major concern because Hormuz previously served as the route for about a fifth of global crude oil and LNG flows before the US and Israel attacked Iran in late February. Vance is scheduled to lead a US delegation to Islamabad for direct talks with Iran on Saturday morning local time.
Market participants believe that a supply recovery is far from certain. Dennis Kissler of BOK Financial Securities said prices could only potentially fall significantly if the strait is completely opened without obstruction, but he believes that is unlikely to happen anytime soon.
On the ground, conflicts continue to escalate sporadically, including Israeli actions in Lebanon and Iranian attacks on Gulf states. Opinions differ on whether the ceasefire also covers Lebanon. Iranian Parliament Speaker Mohammad-Bagher Ghalibaf stated that three clauses of the ceasefire proposal have been violated.
Iran, through its ports and maritime authorities, also announced two safe routes in and out of Hormuz to avoid anti-ship mines. However, even if shipping flows begin to recover, normalization of energy supplies will not be immediate as some upstream production and refinery operations have been reduced or halted, and recovery could take weeks or longer.
5 Key Points:
- Oil rebounded after plunging 13% on Wednesday, its biggest drop since April 2020.
- Brent and WTI returned to around US$97/barrel as Hormuz remained blocked.
- Iran said tankers were temporarily stopped; the US said there were signs Hormuz was reopening.
- Uncertainty over the ceasefire, including the Lebanon issue, kept geopolitical risk premiums high.
- Even though shipping has recovered, supply will not immediately return to normal because production at fields and refineries has been cut or halted. (asd)
Source: Newsmaker.id
