Oil Updates — prices ease as Iran-Israel conflict enters 6th day

Arab News

4 hours ago

LONDON: Oil prices eased in Asian trade on Wednesday, after a gain of 4 percent from the previous session, as markets weighed the chance of supply disruptions from the Iran-Israel conflict against a US Federal Reserve rates decision that could weigh on oil demand.
Brent crude futures slipped 49 cents, or 0.6 percent, to $75.96 a barrel by 9:20 Saudi time. US West Texas Intermediate crude futures fell 38 cents, or 0.5 percent, to $74.46 per barrel.
Both had initially been up 0.3 percent to 0.5 percent in early trade.
US President Donald Trump called on Tuesday for Iran's 'unconditional surrender' as the Iran-Israel air war entered a sixth day.
The US military is deploying more fighter aircraft to the region to bolster its forces, three officials said on Tuesday.
Israel is running low on defensive 'Arrow' missile interceptors, however, raising concerns about its ability to counter long-range ballistic missiles from Iran, the Wall Street Journal said on Wednesday, citing an unidentified US official.
Analysts said the market was largely worried about supply disruptions in the Strait of Hormuz, a conduit for a fifth of the world's seaborne oil.
Iran is OPEC's third-largest producer, extracting about 3.3 million barrels per day of crude oil, but spare capacity among producers in the Organization of the Petroleum Exporting Countries and its allies can readily cover this.
'Material disruption to Iran's production or export infrastructure would add more upward pressure to prices,' Fitch analysts said in a client note.
'However, even in the unlikely event that all Iranian exports are lost, they could be replaced by spare capacity from OPEC+ producers ... around 5.7 million barrels a day.'
Brent crude oil prices have gained about $10 a barrel over the past two weeks, and Fitch analysts said they expect the geopolitical risk premium in oil prices to be contained at about $5 to $10.
Markets are also looking ahead to a second day of US Federal Reserve discussions on Wednesday, in which the central bank is expected to leave its benchmark overnight interest rate in the range of 4.25 percent to 4.50 percent.
However, the conflict in the Middle East and the risk of slowing global growth could push the Fed to potentially cut rates by 25 basis points in July, sooner than the market's current expectation of September, said Tony Sycamore, market analyst with IG.
'The situation in the Middle East could become a catalyst for the Fed to sound more dovish, as it did following the October 7, 2023, Hamas attack,' Sycamore said.
Lower interest rates generally boost economic growth and demand for oil.
Confounding the decision for the Fed, however, is that the Middle East conflict also creates a new source of inflation via surging oil prices.
Further, recent data showed the US economy was slowing as Trump's erratic policymaking style fed uncertainty.