West Texas Intermediate (WTI) crude oil prices declined on Thursday, trading around $73.10 and marking a 1.95% drop for the day as investors took profits after two consecutive days of strong gains [1]. Despite this pullback, the downside for oil prices remains limited due to escalating geopolitical tensions in the Middle East, which continue to underpin the market [1].
Tensions have intensified between the United States and Iran following a new wave of US strikes on Iranian positions. In retaliation, Tehran launched attacks on several US military facilities in the Gulf and threatened further action. US President Donald Trump stated that the memorandum of understanding with Iran, which aimed to ease the conflict, is no longer in effect, raising concerns about renewed regional escalation [1].
The market is closely monitoring developments around the Strait of Hormuz, a critical shipping lane for nearly one-fifth of global oil supplies. Iran's repeated threats to close the waterway have heightened fears of potential supply disruptions, maintaining a geopolitical risk premium in crude oil prices [1]. ING analysts suggest that the market outlook will depend on whether Washington and Tehran can quickly de-escalate tensions. Additionally, Russia's temporary ban on diesel exports through the end of July is contributing to concerns about refined product supplies and could further boost demand for US crude [1].
Commerzbank analysts argue that the market may be underestimating the risks to global oil supply, noting that the apparent collapse of negotiations between Washington and Tehran indicates the conflict is far from resolved. This situation is forcing investors to price in a higher geopolitical risk premium for energy markets [1]. Meanwhile, the latest Energy Information Administration (EIA) data showed a build of 2.998 million barrels in US commercial crude oil inventories for the week ending July 3, the first increase in 11 weeks and significantly above market expectations. However, this inventory data had little impact on prices, as traders remain focused on geopolitical developments rather than short-term supply fundamentals [1].
CONCLUSION
WTI oil prices have retreated below $74 due to profit-taking, but ongoing Middle East tensions and supply concerns are limiting further declines. Market participants are primarily focused on geopolitical risks, with analysts highlighting the potential for further volatility depending on developments between the US and Iran.