Oil Prices Drop Amid Easing Concerns of Broader Middle East Conflict
Brent and U.S. crude oil prices fell on Tuesday as market anxiety over a broader conflict in the Middle East eased, with Iran yet to follow through on its threats to retaliate against Israel for the assassination of a Hamas official in Tehran.
Brent crude futures dropped $1.61, or 1.96%, closing at $80.69 per barrel. U.S. West Texas Intermediate (WTI) crude also declined, finishing $1.71, or 2.14%, lower at $78.35 per barrel.
“The markets had priced in an imminent attack by Iran against Israel within 24 to 48 hours,” said Phil Flynn, senior analyst at Price Futures Group. “That hasn’t happened. The market is taking that risk premium out of the price for crude.”
The International Energy Agency (IEA) maintained its 2024 global oil demand growth forecast but lowered its 2025 estimate, attributing the reduction to sluggish Chinese consumption, which is impacting economic growth.
On Monday, Brent crude surged over 3%, closing at $82.30 per barrel after reaching a seven-month low of $76.30 just a week earlier.
Additionally, the Organization of the Petroleum Exporting Countries (OPEC) revised its 2024 demand expectations downward, despite plans by OPEC+—the alliance of OPEC and other oil-producing nations—to increase output starting in October.
While escalation in the Middle East could threaten crude supplies from one of the world’s key oil-producing regions, the risk of a broader conflict appeared to diminish as Iran hinted at renewed cease-fire talks with Hamas, which could potentially avert retaliation.
“We’re seeing the geopolitical risk premium evaporate,” said Jim Ritterbusch, president of Ritterbusch Associates.
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Despite the current calm, the U.S. remains on alert for possible significant attacks by Iran or its proxies, with White House national security spokesperson John Kirby warning on Monday that such actions could occur as soon as this week.
Traders are also closely watching Wednesday’s U.S. consumer price index report, which is expected to provide important insights into inflation trends.
