West Texas Intermediate (WTI), the US crude oil benchmark, traded around $102.40 during early European hours on Friday, retreating below $102.50 amid a stronger US Dollar. The decline in WTI was attributed to the US Federal Reserve's decision to hold the federal funds rate steady at 3.5% to 3.75% during its April meeting, with Fed Chair Jerome Powell warning of rising near-term inflation expectations and signaling his intention to remain on the Board of Governors for an indefinite period. This hawkish stance supported the Greenback, putting downward pressure on the USD-denominated commodity price [1].
Despite the price retreat, renewed tensions in the Middle East and the closure of the Strait of Hormuz have raised concerns about prolonged supply disruptions, which are limiting further losses in oil prices. The United Arab Emirates (UAE) announced its exit from OPEC effective May 1, following weeks of missile and drone attacks by Iran, highlighting discord among Gulf nations during an ongoing energy crisis caused by the Iran war [1].
Oil supply disruptions persist as the Strait of Hormuz remains closed, which could potentially boost WTI prices in the near term. Additionally, US President Donald Trump was reported to be receiving a briefing on possible military strikes on Iran, with an Iranian official warning of 'long and painful strikes' on US positions if attacks are renewed [1].
Overall, the interplay between a stronger US Dollar, geopolitical tensions in the Middle East, and OPEC dynamics is creating volatility in the oil market, with significant risks of supply disruptions supporting prices despite downward pressure from currency strength [1].
CONCLUSION
WTI prices are currently under pressure from a stronger US Dollar following the Fed's hawkish hold, but ongoing Middle East tensions and supply risks are preventing further declines. The market remains highly sensitive to geopolitical developments and OPEC dynamics, suggesting continued volatility in the near term.