Currently, the ongoing tension between the US and Iran has caused a huge upheaval in crude oil prices. US President Donald Trump has indicated that a decision to attack Iran will be taken within two weeks. This means that the possibility of an immediate attack has reduced and due to this, the fear in the market has reduced a bit, due to which oil prices have fallen. This news has brought a temporary relief to the global market.
How much did the oil fall
Brent crude is currently down to $77 per barrel, while West Texas Intermediate (WTI) for August is trading around $74. White House spokeswoman Caroline Levitt said that it would take some time to decide due to the possibility of negotiations with Iran. However, she has not commented on its timeline. It has been a stormy week for the oil market, with futures hovering around the $8 range.
According to sources, senior US officials were preparing for the possibility of an attack. However, the threat is still not over. Robert Rennie, head of commodities and carbon research at Westpac Banking Corp, said Levitt’s statement had taken some of the urgency off the market. “At least for now, we’re prepared to remain in this highly volatile ($70-$80) range,” he said, reflecting the uncertainty in the market.
Iran-Israel war impacts crude oil
Israel continues to attack Iran’s nuclear sites, but so far the country’s crude export infrastructure appears to be safe. However, there are indications that Iran is in a hurry to export its oil to the world, as storage tanks at the Kharg Island Terminal are full of crude oil. This shows the importance of crude oil exports to Iran’s economy.
Importance of the Strait of Hormuz
The biggest concern for the oil market is the Strait of Hormuz. However, so far there have been no indications that Tehran is trying to disrupt the movement of ships through this waterway at the entrance to the Persian Gulf. About a fifth of the world’s crude oil production passes through this strait. If this strait is obstructed, there will be a serious impact on the global oil supply, which could cause prices to skyrocket.