Oil prices drop to levels seen before the recent Iran conflict, giving global markets a reason to relax. Brent crude, the global oil benchmark, fell to $72.24 per barrel on Thursday. That is slightly below the price recorded before the US and Israel launched missile strikes on Tehran. Oil prices have now dropped by more than 20% this month. At the same time, shipping activity through the Strait of Hormuz has picked up strongly, helping to ease fears of supply shortages.
Fresh data from CNN and MarineTraffic shows vessel traffic through the strategic waterway doubled within 24 hours. It also reached its highest level since late February. Analysts say this increase is boosting confidence that oil supplies will remain stable. Ipek Ozkardeskaya, Senior Analyst at Swissquote, said vessels moving through the Strait of Hormuz with their satellite signals switched on helped push prices lower. She added: “A combination of strategic inventory releases, a collapse in demand from top buyer China and a substantial number of tankers quietly leaving the Persian Gulf ‘dark’ had contributed to a small oversupply in some important markets.”
Meanwhile, investors are becoming less worried about a prolonged energy crisis. Susannah Streeter, Chief Investment Strategist at Wealth Club, said: “Fears of a long-lasting global energy crunch induced by the Iran conflict are slinking away, with oil prices sinking back towards pre-crisis levels.” However, she noted that caution remains because weak economic growth and extreme heat across Europe are creating fresh challenges. Demand for electricity has surged as homes, offices and public buildings increase cooling to cope with record temperatures.
Despite the positive outlook, risks remain. A Liberian-registered oil tanker successfully exited the Strait of Hormuz on Thursday using a new route near Oman. The move came despite threats from Iran’s Revolutionary Guards. In addition, tensions between Iran and the US continue over the terms of their temporary peace agreement. Ozkardeskaya expects oil prices to remain volatile in the coming weeks. She said: “Geopolitical risks remain, as the Middle East is rarely a calm sea, China will start tapping into the oil market as tensions ease, and countries will begin replenishing their strategic reserves, absorbing part of the additional supply.” She predicts oil prices will likely trade between $60 and $80 per barrel.
