Slight Decline in Oil Prices Amid Rising Tensions and Anticipation of Iranian Supply Return

SadaNews Economy - Oil prices fell slightly today, Monday, as investors balanced between U.S. and Iranian threats to target energy facilities, which could escalate the conflict further, and the release of millions of barrels of sea-borne Iranian oil to global markets after Washington temporarily lifted sanctions.

Brent crude futures dropped by 0.3% to $111.84 per barrel, after hitting their highest level since July 2022 on Friday.

Meanwhile, West Texas Intermediate crude steadied at $98.31 per barrel, following gains of 2.27% in the previous session.

The price spread between Brent crude and West Texas Intermediate exceeded $13 per barrel, the widest in several years.

Michael McCarthy, CEO of the "Moomoo Australia" platform, stated that the temporary decline in prices is attributed to weak liquidity and short-term profit-taking.

He added to Reuters, "The overall momentum still leans towards the upside, and testing levels close to $120 is a realistic scenario this week."

In a further escalation of tensions, U.S. President Donald Trump threatened on Saturday to "destroy" Iranian power stations if Tehran did not fully reopen the Strait of Hormuz within 48 hours, just a day after he mentioned the possibility of "ending" the war that has entered its fourth week.

Conversely, Iranian Islamic Consultative Assembly Speaker Mohammad Baqer Qalibaf warned that targeting Iranian power stations could lead to "irreversible destruction" of vital infrastructure and energy facilities in the Middle East.

Amrita Sen, founder of "Energy Aspects," noted that these developments clearly imply further escalation, which supports rising oil prices, suggesting that some may misjudge Iran's position.

She added, "Trump is trying to demonstrate his ability to escalate further, which could ultimately lead to the destruction of infrastructure in the Gulf."

For his part, the Executive Director of the International Energy Agency, Fatih Birol, described the crisis in the Middle East as "extremely severe," considering that it surpasses the severity of the oil shocks of the 1970s combined.

The stabilization of prices came despite the sharp volatility seen earlier in the session, as Tim Water, chief market analyst at "KCM Trade," pointed out that traders are questioning whether the U.S. warning will succeed.

He said, "Markets do not want to pre-empt events, especially given the possibility of reopening the Strait of Hormuz in response to this pressure."

The war has caused significant damage to energy facilities in the Gulf, nearly disrupting shipping traffic through the Strait of Hormuz, where about 20% of global oil and liquefied natural gas flows transit.

Analysts estimate that supply losses in the Middle East range from 7 million to 10 million barrels per day.

In a related context, three energy sector officials reported that Iraq declared force majeure on all oil fields developed by foreign companies.

Iraqi Oil Minister Hayyan Abdul Ghani stated that Basra Oil Company’s crude production will be reduced from 3.3 million barrels per day to 900,000 barrels per day.

At the same time, traders noted that refineries in India are preparing to resume purchasing Iranian oil, while other refineries in Asia are considering similar steps.