Oil prices edged lower today, as traders assessed whether the previous day’s jump to the highest prices in more than two months had adequately priced in risks for crude oil supply from mounting tensions in the Middle East.
Brent crude futures were down 34 cents, or 0.5%, at $69.43 a barrel at 1532 GMT. US West Texas Intermediate crude fell 18 cents, or 0.3%, to $67.97 a barrel.
On Wednesday, the US decided to move personnel out of the Middle East, and both benchmarks surged more than 4% to their highest since early April.
The surge put the market in overbought territory based on several technical indicators, so it was likely due for a brief correction, StoneX Energy analyst Alex Hodes said.
On Wednesday, US President Donald Trump said he was growing less confident that Tehran would agree to stop enriching uranium, a key demand in US talks with Iran over its nuclear program. Trump has previously threatened to strike Iran if the talks fail.
Tehran, which asserts its nuclear activity is for peaceful purposes, has said it would retaliate against strikes by hitting US bases in the region. Iran will not abandon its right to uranium enrichment, a senior Iranian official said on Thursday.
Rising tensions in the region have oil traders worried about possible supply disruptions.
Britain’s maritime agency warned on Wednesday that increased tensions in the Middle East may escalate military activity and impact shipping in critical waterways.
“For the oil market, the absolute nightmare is a closure of the Strait of Hormuz,” Arne Rasmussen, an analyst at Global Risk Management, said in a LinkedIn post.
“If Iran blocks this narrow chokepoint, it could affect up to 20% of global oil flows,” he added.
JPMorgan said oil prices could surge to $120-$130 a barrel if the Strait of Hormuz were to be shut, a scenario the bank considered to be severe but a low risk.
Still, oil traders were growing cautious.
“We are still higher than two days ago as some short investors prefer to stay on the sidelines amid the uncertainty,” said Giovanni Staunovo, an analyst at UBS.
US special envoy Steve Witkoff plans to meet Iranian Foreign Minister Abbas Araghchi in Oman on Sunday to discuss Iran’s response to a US proposal for a deal.
The UN nuclear watchdog’s 35-nation Board of Governors declared Iran in breach of its non-proliferation obligations on Thursday for the first time in almost 20 years, raising the prospect of reporting it to the UN Security Council.
