Key Points
- Brent and WTI rise modestly after the latest US-Iran exchange of strikes.
- Previous hopes of a ceasefire had erased much of the war-driven oil risk premium.
- Markets remain focused on the Strait of Hormuz and physical crude flows.
ISLAMABAD: International crude oil benchmarks posted only modest gains after fresh exchanges of strikes between the United States and Iran, with Brent crude holding near $72 per barrel and US West Texas Intermediate (WTI) around $69 per barrel.
The market’s measured reaction to the latest tensions in the Strait of Hormuz underscores the traders’ belief that the latest escalation has yet to disrupt physical oil supplies.
The restrained reaction contrasts sharply with the massive swings seen earlier in the conflict, when optimism over a sustained ceasefire and smoother tanker movements through the Strait of Hormuz wiped out much of the geopolitical premium that had driven prices higher.
The latest exchange of military strikes revived concerns over the security of the Strait of Hormuz, a strategic chokepoint through which about one-fifth of the world’s seaborne crude oil passes.
Traders briefly increased the geopolitical risk premium, but buying remained restrained as shipping traffic continued largely uninterrupted and there was no confirmation of significant damage to oil production or export infrastructure.
Brent crude and WTI both edged higher after reports that the United States launched fresh strikes on Iranian targets and Tehran responded with retaliatory attacks against US-linked assets, marking the most serious breach of the fragile ceasefire reached earlier this month.
Oil market balancing narratives
Energy analysts said the market is balancing two competing narratives. On one hand, renewed hostilities raise the possibility of supply disruptions if the conflict spreads or affects tanker traffic through the Gulf.
On the other hand, current oil production remains stable, commercial exports from major Gulf producers continue to flow, and global inventories are considered adequate to absorb short-term shocks.
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The Strait of Hormuz has once again become the focal point for oil traders. Maritime security advisories have intensified following the latest incidents, prompting some shipowners to reassess transit schedules and insurers to review war-risk premiums.
Even so, there has been no sustained interruption to commercial shipping through the waterway.
The relatively muted market response also reflects expectations that OPEC+ retains sufficient spare production capacity to offset temporary supply losses if required.
At the same time, some traders continue to monitor the possibility of additional Iranian crude reaching international markets should diplomatic channels reopen or sanctions enforcement ease.
Market participants are now watching several critical developments, including any attacks on Gulf energy infrastructure, disruptions to tanker movements through the Strait of Hormuz, changes in US sanctions policy toward Iranian oil exports, and renewed diplomatic efforts aimed at restoring the ceasefire.
Analysts caution that the market could react much more aggressively if physical exports are interrupted.
A prolonged closure of the Strait of Hormuz or attacks on major production facilities could quickly push Brent crude back toward the $90-$100 per barrel range. Conversely, if crude shipments continue uninterrupted and diplomatic efforts regain momentum, prices could remain anchored near current levels.
For Pakistan, continued volatility in international oil markets carries significant economic implications.
As a major importer of crude oil and refined petroleum products, the country remains vulnerable to sustained increases in global energy prices, which would raise the import bill, increase pressure on the current account, fuel inflation and eventually influence domestic petroleum pricing.
