Oil prices declined on Wednesday as Washington signaled a shift away from military strikes against Iran toward economic pressure, easing immediate supply concerns in global crude markets. International benchmark Brent crude futures for November delivery traded at $85.49 per barrel at 09:52 a.m. local time (0652 GMT), down 2% from the previous close of $87.27. US benchmark West Texas Intermediate crude futures for October delivery traded at $80.45 per barrel, down 0.6% from $80.98.
US Secretary of State Marco Rubio communicated to several allied foreign ministers that Washington does not expect to launch new strikes against Iran "for the time being," according to reporting by Axios on Tuesday. The shift signals a transition toward economic and maritime pressure rather than military escalation. However, Washington has not ruled out military action if Iran initiates strikes.
US officials indicated that Washington plans to intensify economic pressure on Tehran through a naval blockade and tighter sanctions, while simultaneously seeking to facilitate Iranian oil flows through the Strait of Hormuz into global markets. The reduced prospect of renewed military strikes eased immediate concerns over escalation that could further disrupt regional oil supplies. News that Iran has agreed with Oman to establish a temporary transit route through the Strait of Hormuz further pressured prices by easing market players' supply concerns.
Iranian Deputy Foreign Minister Kazem Gharibabadi stated on Tuesday that the two countries would hold further negotiations over the next 30 to 60 days to determine a permanent route and future arrangements for passage through the strategic waterway. Gharibabadi stressed that the temporary arrangement does not amount to a full reopening of the strait, emphasizing that Iran would only reopen it after the US fulfills its commitments under the Islamabad Memorandum of Understanding, including ending the war and lifting the blockade. Persistent inflation concerns continue to weigh on oil prices by keeping expectations of another Federal Reserve rate hike alive through year-end.
Investors are closely monitoring US economic growth data and the personal consumption expenditures price index due Wednesday, which serves as the Fed's preferred inflation gauge. Analysts noted that a potential slowdown in the core PCE price index, which excludes volatile food and energy prices, could shift expectations for another rate hike by year-end and increase market volatility. Higher interest rates could slow economic activity and weaken energy demand while strengthening the US dollar, making dollar-denominated oil more expensive for holders of other currencies.
The US Dollar Index, which tracks the greenback against a basket of major currencies, rose by 0.1% to 99.01. The American Petroleum Institute estimated that US commercial crude oil inventories rose by 4.2 million barrels last week, compared with market expectations for a 1.8 million-barrel increase. The larger-than-expected build signaled weaker demand in the world's largest oil consumer, adding to downward pressure on prices.
Escalating trade tensions are also weighing on oil prices by clouding the global economic and demand outlook. Source: Anadolu Agency
Source: aa.com.tr