Oil prices pared gains as traders assessed the prospects for peace talks on the Iran war after the United States launched a brief attack on Iran following the downing of an American helicopter.
Brent crude fell toward $91 a barrel, after rising as much as 2% earlier in the session, while West Texas Intermediate crude approached $88. The United States targeted sites near the Strait of Hormuz. In response, Iran launched a drone attack on the U.S. Fifth Fleet in Bahrain, according to the official Iranian state broadcaster IRIB, and also targeted U.S. military installations in Jordan and Kuwait.
U.S. Central Command said in a statement on its X platform that the defensive strikes on Iran were carried out at the direction of President Donald Trump in response to the downing of an Apache helicopter off the coast of Oman. The statement added: The mission was a proportionate response to Iran's unprovoked aggression.
The Central Command noted that US forces targeted air defense sites, ground control centers, and radar monitoring sites near the Strait of Hormuz with precision munitions launched from warplanes.
Qeshm Island in the Strait of Hormuz was attacked, along with the Jask area near the narrow waterway, according to Iranian state television. Trump had earlier blamed Tehran for the attack on the helicopter, which he said was patrolling the strait, and vowed to retaliate.
Iranian Foreign Minister Abbas Araqchi said on Thursday, following the latest hostilities, that Iran will not leave any attack or threat unanswered.
Ceasefire stability
The new attacks threaten the fragile ceasefire in the region and negotiations for a more lasting agreement between the warring parties. Trump has repeatedly stated that peace talks are on track, following an escalation earlier in the week in which Israel and Iran exchanged attacks.
Saul Kavonic, senior energy analyst at MST Marquee, said the strikes further highlight that any deal with Iran is still a long way off. He added: “But the market is taking some comfort from the fact that the strikes have remained proportionate, rather than an all-out attack, which suggests that the desire to prefer a deal to war still exists.”
The latest round of hostilities threatens to prolong the near-total closure of the vital Strait of Hormuz, which is under a dual blockade by the United States and Iran. The conflict, which began in late February, has disrupted supplies of crude oil, fuel, and natural gas, and raised fears of an inflation crisis.
U.S. crude oil inventories fell by 9.1 million barrels last week, according to a report from the American Petroleum Institute seen by Bloomberg, which would be the biggest drop since September if confirmed by government data later on Wednesday.
The country's stockpiles have already reached their lowest level in four months, reflecting a decline in global supplies as buyers seek to compensate for the shortfall in oil inventories in the Arabian Gulf.
Kavonic said: Every day that passes increases competition in the market as global oil inventories fall to unprecedented lows.
In the latest trading, Brent crude futures for August settlement settled at $91.45 a barrel at 1:45 p.m. Singapore time, after falling 3% in the previous session, while West Texas Intermediate crude futures for July delivery were little changed at $88.20 a barrel.
