Oil Prices Climb Following Largest Decline Since 2020 Amid Ongoing Blockage of Strait of Hormuz

Oil Prices Rebound Amid Middle East Tensions

Oil prices rebounded on Thursday after suffering their biggest one-day drop since April 2020, as the Strait of Hormuz remained largely blocked and Israeli attacks on Lebanon threatened to derail the fragile ceasefire in the Middle East. West Texas Intermediate traded near $97 a barrel, following a 14% slump on Wednesday, while Brent closed below $95.

The near-halt of traffic through the Strait of Hormuz, a key waterway through which about a fifth of the world's crude and liquefied natural gas flowed before the US and Israeli strikes on Iran at the end of February, has caused the biggest-ever oil market disruption. US Vice President JD Vance said that the US is seeing signs that the strait is starting to reopen, although Iran's semi-official Fars news agency reported that oil tanker passage through the strait had been halted after Israeli strikes.

US Delegation to Hold Talks with Iran

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Vice President Vance will lead a US delegation to Islamabad for direct talks with Iran on Saturday morning local time. The talks come as sporadic fighting continues throughout the region, including Israeli moves in Lebanon and Iranian strikes on Gulf states. There is disagreement between Tehran and the American-Israeli side over whether the ceasefire covers Lebanon.

Iranian Parliament Speaker Mohammad-Bagher Ghalibaf has stated that three clauses of the ceasefire proposal have been violated so far. Even once Hormuz transit picks up, the return of energy supplies won't be instant, as output has been reduced at oil and gas fields, and refineries have curtailed production or shut down. Some of these facilities may take weeks or longer to return to normal.

Market Outlook

According to oil and gas analysts, the market is still far from recovery. "We're still far from over in Iran," said Carl Larry, an oil and gas analyst at Enverus. "Every day remains an adventure, but $90 looks like a solid floor until we see fiction become fact." Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc., stated that crude prices in the low $80s for WTI are unlikely in the next two weeks, even if the Strait of Hormuz reopens.

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Note: Data on oil prices and market changes refers to the latest available information at the time of publication.