KEY POINTS
- Oil prices rose as uncertainty over a Middle East ceasefire raised concerns about supply through the Strait of Hormuz.
- Analysts say geopolitical tensions and logistical challenges could keep oil markets volatile.
- Security threats and shipping disruptions in the Gulf continue to affect global energy flows
Global oil prices rose on Thursday as doubts over the durability of a ceasefire in the Middle East raised concerns that energy shipments through the strategic Strait of Hormuz could remain restricted.
Brent crude futures increased by $1.96, or 2.07 percent, to $96.71 per barrel in early trading, while US West Texas Intermediate crude gained $2.60, or 2.75 percent, to $97.01 per barrel.
Both benchmark prices had fallen below $100 per barrel during the previous trading session after initial expectations that a ceasefire between the United States and Iran would lead to a full reopening of the key oil transit route.
Despite the ceasefire announcement, analysts say market participants remain cautious as there is still uncertainty surrounding negotiations between Washington and Tehran and how they may affect oil flows.
Vandana Hari, founder of oil market analysis firm Vanda Insights, said the chances of a significant reopening of the Strait of Hormuz in the near term appear limited, suggesting that oil prices could remain volatile.
She noted that the futures market has not fully returned to levels seen before the ceasefire, indicating that traders are still factoring geopolitical risks into pricing.
The Strait of Hormuz serves as a critical global energy corridor, transporting supplies from major Gulf producers such as Iraq, Saudi Arabia, Kuwait, and Qatar to international markets. The route typically carries about 20 percent of global oil and gas shipments.
Security threats and logistics challenges persist
Concerns over supply disruptions remain high as regional tensions continue. The ceasefire’s stability has been questioned following ongoing attacks involving Israel and Lebanon, prompting Iran to suggest it may be unreasonable to move forward with broader peace negotiations.
Shipping companies have also said they require clearer terms of the ceasefire before resuming normal operations through the Strait of Hormuz. Iranian authorities have reportedly issued navigation maps showing routes around mines and safe shipping corridors coordinated with the country’s Revolutionary Guards.
Analysts at Standard Chartered said logistical difficulties, security fears, higher insurance costs, and operational constraints could limit energy shipments through the strait in the coming weeks.
Regional oil infrastructure also remains at risk. According to industry sources, Iran recently struck energy facilities in nearby countries, including a pipeline in Saudi Arabia that is used to bypass the Strait of Hormuz. Missile and drone attacks were also reported in Kuwait, Bahrain, and the United Arab Emirates.
Meanwhile, Goldman Sachs maintained its oil price forecasts for the third and fourth quarters at $82 and $80 per barrel for Brent, and $77 and $75 for West Texas Intermediate crude. However, the bank lowered its second-quarter forecast to $90 for Brent and $87 for WTI, citing a reduction in the geopolitical risk premium.
