Oil prices gave up some of their gains on Thursday as oil tankers continued to make their way out of the Middle East even as tensions there escalated, with the U.S.-Iran war spreading beyond its main fronts.
Brent futures fell $1.29, or 1.42%, to $89.45 a barrel as of 0110 GMT. U.S. West Texas Intermediate (WTI) crude fell 56 cents, or 0.66%, to $83.90 a barrel. Brent settled up 7.91% in the previous session and WTI up 6.56% in one of the sharpest spikes of the Iran war, reversing a 5% plunge on Tuesday after a pause in hostilities in the five-month conflict.
Thirty-nine commodity ships passed through the Bab el-Mandeb strait into the Red Sea on Tuesday, the highest number since July 19, with only a few transiting through the Strait of Hormuz, preliminary shipping data showed.
"While overall volumes are reduced, oil continues to leak out of the region through multiple channels, and additional workarounds are being explored. The longer this situation persists, the more these alternative routes and methods will erode Iran's leverage over the Strait of Hormuz," IG market analyst Tony Sycamore said in a note.
The Strait of Hormuz is the world's most important oil shipping route, through which around a fifth of global oil and gas flows previously passed. It has been largely blocked since the start of the U.S.-Iran war in February despite efforts to reach a diplomatic breakthrough on the passage of ships through the strait.
Iran has ruled out an Omani proposed for regional joint management of the strait, a senior Iran official said on Wednesday.
U.S.-Saudi strikes hit Iran-backed paramilitary forces in Iraq on Wednesday, the first time that Saudi had publicly joined U.S. air strikes, in retaliation for drone attacks on Saudi oil targets launched from Iraq.
That marked the resumption of U.S. strikes in the Middle East, since President Donald Trump over the weekend called off a bombing campaign amid dwindling munitions.
Iran also said that it had fired on U.S. bases in Jordan and struck three tankers that were transiting the Strait of Hormuz through what it said was an unauthorised route.
Sources said on Wednesday that Saudi Arabia was seeking to build a coalition to protect Red Sea shipping from Houthi attacks.
The Iran-backed group in Yemen said on July 20 that it would impose a naval blockade on Saudi Arabia in the Red Sea, expanding attacks on tankers and opening another new front in the Iran War in a push to also disrupt shipping in the Bab el-Mandeb strait, the second most important oil shipping channel.
