West Texas Intermediate’s May contract swung in a more than $7 range before settling higher near $98 a barrel. Brent for June edged up to end the day just below $96. Both benchmarks lifted by roughly $2 in post-settlement trading.
Prices rallied into market close as Saudi Arabia’s press agency said the nation’s oil production capacity has been cut by around 600,000 barrels a day due to attacks on energy infrastructure from the conflict. That figure accounts for roughly one-tenth of normal Saudi crude exports, according to Bloomberg calculations. Kuwait, meanwhile, said it is currently intercepting drone attacks and that some vital facilities were targeted.
The headlines halted oil’s steady descent from intraday highs as investors absorbed de-escalatory rhetoric, reminding markets that tensions remain high across the Persian Gulf. US Vice President JD Vance is expected to lead the American delegation in discussions with Iran scheduled in Pakistan on Saturday.
But flows through the vital Strait of Hormuz are still severely curtailed. The near-closure of the waterway — through which about a fifth of the world’s oil and liquefied natural gas flowed before the US and Israel first struck Iran at the end of February — has caused the biggest-ever oil market supply disruption.
Even once Hormuz transit picks up, the return of energy supplies won’t be instant. Output has been reduced at oil and gas fields, while refineries have curtailed production or shut down. Some of those will take weeks — or possibly longer — to return to normal.
“The fact of the matter is, it’s not over until it’s over. Missiles, mines and drones are still running through the region,” said Carl Larry, an oil and gas analyst at Enverus. “We can keep hope alive as talks continue, but damages, especially to areas that are sensitive to oil and shipping are still a large part of the equation.”
The conflict has sparked intense headline volatility, prompting the Intercontinental Exchange Inc. to make it more expensive to trade its Brent crude contracts. The shift threatens to further sap liquidity from an already thin market.
Both benchmarks pared advances on Thursday after Israel agreed to direct talks with Lebanon, though Israeli Prime Minister Benjamin Netanyahu later clarified that there is “no ceasefire in Lebanon.” That contradicted President Donald Trump’s assurances that Israel is “scaling back” operations in that country. Israeli strikes on Lebanon led Iran to again halt traffic through the strait on Wednesday.
The boss of the UAE’s biggest oil company said Iran is restricting access to Hormuz. Iran’s Foreign Minister Abbas Araghchi said safe transit through the waterway is possible via guidelines.
Two fully-laden Chinese oil tankers in the Persian Gulf were approaching the strait on Thursday, potentially putting them on track to become the first such vessels to cross since the ceasefire was announced.
“While paper markets tend to price a full reopening, the physical reality is that any recovery in flows will be gradual — and hasn’t meaningfully begun,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
Meanwhile, the Islamic Republic’s Ports and Maritime Organization announced two designated safe routes for vessels entering and exiting the strait, according to state-run Nour News. The passageways were established to avoid possible mines, according to the report.
Physical markets continued to show signs of strength. A fresh round of cargo bidding in the North Sea sent the Dated Brent physical crude benchmark soaring to almost $132 a barrel, according to a broker monitoring S&P Global data.