Oil Prices Fall as Tankers Continue Operations Amid Middle East Conflict

Oil prices fell on Thursday after giving up some of their recent gains, as oil tankers continued to leave the Middle East despite rising tensions and the US-Iran war spreading to new areas.

Brent crude futures dropped $1.29, or 1.42%, to $89.45 a barrel by 0110 GMT. US West Texas Intermediate (WTI) crude also fell 56 cents, or 0.66%, to $83.90 a barrel.

The decline came after a sharp rise in oil prices during the previous session. Brent had gained 7.91%, while WTI increased 6.56%. The rise followed a 5% fall on Tuesday after a temporary pause in fighting during the five-month Iran war.

Shipping data showed that 39 commodity ships passed through the Bab el-Mandeb Strait into the Red Sea on Tuesday. This was the highest number recorded since July 19. However, only a small number of vessels were reported to be using the Strait of Hormuz.

“While overall volumes are reduced, oil continues to leak out of the region through multiple channels, and additional workarounds are being explored. The longer this situation persists, the more these alternative routes and methods will erode Iran’s leverage over the Strait of Hormuz,” IG market analyst Tony Sycamore said in a note.

The Strait of Hormuz is one of the world’s most important oil shipping routes. Before the conflict, around one-fifth of global oil and gas supplies passed through the waterway. The strait has been largely blocked since the US-Iran war began in February, despite ongoing efforts to find a diplomatic solution that would allow ships to pass safely.

A senior Iranian official said on Wednesday that Iran had rejected an Omani proposal for joint regional management of the Strait of Hormuz.

Meanwhile, US and Saudi forces carried out strikes against paramilitary groups in Iraq on Wednesday. It was the first time Saudi Arabia had publicly joined US airstrikes. The attacks came in response to drone strikes launched from Iraq against Saudi oil facilities.

The strikes marked a resumption of US military action in the Middle East after President Donald Trump called off a bombing campaign over the weekend because of concerns about declining ammunition supplies.

Iran also said it had attacked US military bases in Jordan and struck three oil tankers passing through the Strait of Hormuz. Tehran said the tankers were using an unauthorised route.

Sources said on Wednesday that Saudi Arabia was working to form a coalition to protect shipping in the Red Sea from attacks by the Houthis.

The Houthi group in Yemen said on July 20 that it would impose a naval blockade on Saudi Arabia in the Red Sea. The group also threatened to expand attacks on oil tankers, opening another front in the Iran war and increasing the risk of disruption to shipping through the Bab el-Mandeb Strait, another major route for global oil supplies.