Oil Falls, Market Evaluates Risk of US-Iran Supply Disruptions
Oil prices weakened in trading on Tuesday (May 5) as market participants reassessed the risk of short-term supply disruptions amid renewed tensions between the United States and Iran.
Brent crude fell around 1.3% to US$112.85 per barrel, while West Texas Intermediate (WTI) weakened 2.5% to around US$103.78 per barrel, after both surged sharply in the previous session.
The fragile ceasefire between the US and Iran appeared to be threatened again after Iranian drone and missile attacks hit the United Arab Emirates. Meanwhile, Washington announced it had sunk an Iranian vessel in the Strait of Hormuz, a strategic route for global energy shipments. This situation increased market uncertainty, although no major supply disruptions have been confirmed.
US President Donald Trump warned that Iran would face severe consequences if it attacked US vessels securing commercial traffic in the strait. These strong statements reinforced Washington's stance on keeping the vital shipping lane open.
Meanwhile, Iranian Foreign Minister Abbas Araghchi stated that developments in the Strait of Hormuz demonstrate that there is no military solution to the ongoing political crisis. He added that Pakistan-facilitated talks are still showing progress and warned against further escalating the situation.
Analysts from ING bank believe the latest spate of attacks represents an early sign of the weakening of the US-Iran ceasefire. However, the market received some relief after Trump implied that the conflict would likely be short-lived. Nevertheless, oil price volatility is expected to remain high as long as geopolitical uncertainty persists.
Source: Newsmaker.id
