Oil prices rebounded after their biggest daily drop since April 2020, as the Strait of Hormuz remained largely closed and Israeli attacks on Lebanon threatened to undermine the fragile ceasefire in the Middle East.
Brent crude rose to around $97 a barrel after falling 13% on Wednesday, while West Texas Intermediate crude also settled near $97.
Iran’s semi-official Fars news agency reported that oil tanker traffic through the Strait of Hormuz had stopped following the Israeli strikes, but US Vice President J.D. Vance denied this, saying: “We are seeing signs of the Strait beginning to reopen.”
On Thursday, two fully laden Chinese oil tankers in the Arabian Gulf were approaching the Strait of Hormuz, potentially putting them on track to become the first such vessels to transit the waters since the ceasefire was declared. However, a successful passage is not guaranteed, and shipping traffic remained largely unchanged throughout the day.
The biggest disruption in the oil market
The near-total halt in shipping traffic through this waterway, which carried about a fifth of the world's crude oil and liquefied natural gas supplies before the United States and Israel began striking Iran at the end of February, has led to the biggest disruption ever seen in oil markets.
Vance is scheduled to lead a US delegation to Islamabad for direct talks with Iran on Saturday morning local time, to end the war.
Dennis Kessler, senior vice president of trading at BOK Financial Securities, said the matter is not over yet, adding: We need to see a complete and unobstructed opening of the Strait before we see oil prices in the 80s range for West Texas Intermediate crude. I don't see that happening within the next two weeks.
Continued fighting threatens the truce
Sporadic clashes continued across the region, including Israeli incursions into Lebanon and Iranian strikes on Gulf states. There is also disagreement between Tehran and the US and Israel regarding whether a ceasefire includes Lebanon.
Iranian Parliament Speaker Mohammad Baqer Qalibaf said in a statement published on the X platform that three clauses of the ceasefire proposal have been violated so far.
Meanwhile, Iran's Ports and Maritime Organization announced two designated safe passages for ships entering and exiting the Strait of Hormuz, according to the official Nour News Agency. These passages were established to avoid anti-ship mines, the report stated.
The return of supplies will take time even with the Strait of Hormuz open.
However, even if transit through the Strait of Hormuz resumes, the return of energy supplies will not be immediate. Production at oil and gas fields has been reduced, while refineries have cut back or halted operations. A return to normal activity at some of these facilities could take weeks, or even longer.
Carl Larry, an oil and gas analyst at Inverus, said: We are still far from the end in Iran. Every day brings new developments, but the $90 level looks like a solid floor until we see the forecasts materialize.
Brent crude for June delivery rose 2.3% to $96.96 a barrel at 7:35 a.m. London time. West Texas Intermediate crude for May delivery also climbed 3.3% to $97.52 a barrel.
