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Oil Prices Ease After 4% Surge as U.S.-Iran Tensions and Supply Risks Remain in Focus

Oil Prices Ease After 4% Surge as U.S.-Iran Tensions and Supply Risks Remain in Focus. Source: Photo by Brett Sayles

Oil prices edged lower during early Asian trading on Thursday, retreating slightly after a sharp 4% rally in the previous session. Investors are closely monitoring rising geopolitical tensions between the United States and Iran, while also weighing diplomatic efforts aimed at easing conflict in the strategically important oil-producing region.

Brent crude futures slipped 12 cents, or 0.2%, to $70.23 per barrel by 0110 GMT. U.S. West Texas Intermediate (WTI) crude fell 8 cents, or 0.1%, to $65.11 per barrel. Despite the minor pullback, both oil benchmarks closed more than 4% higher on Wednesday, marking their strongest settlement levels since January 30. The surge reflected growing concerns over potential oil supply disruptions linked to escalating U.S.-Iran tensions.

Market analysts note that while geopolitical risks remain elevated, traders are adopting a cautious stance. Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said that although tensions between Washington and Tehran persist, investors generally believe a full-scale military conflict is unlikely. He added that any potential U.S. military response would likely involve limited, short-term air strikes rather than a prolonged confrontation. Additionally, U.S. President Donald Trump is widely seen as reluctant to allow a significant spike in crude oil prices.

Diplomatic discussions between U.S. and Iranian officials in Geneva reportedly made limited progress this week. The White House indicated that negotiations are ongoing, with Iran expected to present further details in the coming weeks. However, Iran issued a notice to airmen (NOTAM) announcing planned rocket launches in southern regions, while the U.S. has deployed warships near Iranian waters. Vice President JD Vance confirmed that Washington is evaluating whether to continue diplomatic engagement or pursue alternative measures.

Meanwhile, global energy markets are also tracking the ongoing Russia-Ukraine conflict, as peace talks concluded without significant progress. On the supply side, American Petroleum Institute data showed declines in U.S. crude, gasoline, and distillate inventories last week, contrary to expectations for a crude stock build. Traders now await official U.S. Energy Information Administration data for further direction in the volatile oil market.

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