Oil prices fell Thursday as mediators between the United States and Iran work to prevent the latest fighting from escalating into a return to full-fledged war.
Brent crude futures, the international benchmark, fell nearly 2.7% to $75.78 a barrel. West Texas Intermediate Futures fell about 2.6% to $71.57.
Qatar and Pakistan are working to bring Washington and Tehran back to the negotiating table, officials from the countries tell MS NOW.
Prices rose earlier in the session after the United States overnight bombed about 90 targets in Iran. It was the second consecutive day of U.S. strikes in retaliation for Iranian attacks this week on oil tankers transiting the Strait of Hormuz.
Tehran responded by firing missiles and drones at U.S. assets in Bahrain, Kuwait, Qatar and Jordan, according to Iranian state media.
WTI rose 4.4% on Wednesday, posting its biggest daily gain since June 1, after President Donald Trump declared the ceasefire with Iran was over and threat reimpose the American naval blockade. Brent gained 5.4% in the previous session, making its biggest daily gain since May 4.
Tanker traffic transit through Hormuz slowed this week as the security situation in the strait deteriorated. But the oil market does not price in a total shutdown of Hormuz, said Andy Lipow, president of Lipow Oil Associates.
“This appears to embed a new normal where periods of conflict (perhaps we could call them missile skirmishes) occur between periods of relative calm (or unease) that allow tanker transit,” Lipow wrote in a Thursday memo.
The United States and Iran are expected to resume negotiations in the coming weeks, Citibank analysts told clients on Thursday. Washington and Tehran have too much to lose in a spiral of escalation that leads to the destruction of the region’s energy infrastructure, they said.
“On the US side, President Trump has shown an affinity for high stock prices and stable bond markets, which is why we believe he will return to negotiations in relatively short order,” Citi analysts said.