Crude oil futures fell on Thursday despite ongoing military tensions in the Middle East, as investors shifted focus from geopolitical rhetoric to actual supply flows through the region's critical chokepoints.
Oil markets experienced a pullback in trading on Thursday, with Brent crude futures declining 96 cents to $89.78 per barrel and U.S. West Texas Intermediate dropping 64 cents to $83.82 per barrel. The decline came despite escalating military activity in the Gulf region, marking a reversal of the sharp gains posted in the previous session when Brent surged 7.91 per cent and WTI rose 6.56 per cent.
The earlier price spike was triggered by U.S. President Donald Trump's statements on Wednesday threatening to retaliate "very hard" against Iran following an Iranian missile attack on a U.S. base in Jordan. The U.S. subsequently conducted two hours of strikes on Iran, while the United States and Saudi Arabia jointly attacked Iran-backed paramilitary forces in Iraq—marking Saudi Arabia's first public participation in such operations. However, analysts suggest traders have already priced in the military escalation and are now focusing on actual supply implications.
Despite Iran's closure of the Strait of Hormuz following the U.S.-Israeli conflict that began in February, and the Houthi naval blockade of the Red Sea's Bab el-Mandeb strait imposed in July, crude oil continues flowing to global markets through alternative routes. Rystad Energy estimates approximately 13 million barrels per day of Gulf oil is still reaching markets, while some cargoes—particularly those connected to Chinese tankers—have bypassed the Houthis' disruptions.
Analysts note that price movements are being constrained by the reality of continuing supply flows. As more alternative routes develop to circumvent regional disruptions, Iran's leverage over the Strait of Hormuz may gradually diminish, suggesting that geopolitical headlines alone may have limited ability to sustain sustained oil price increases.
