Oil prices declined on Thursday amid escalating tensions in the Middle East, as concerns grew over potential disruptions to key shipping routes and the broader implications for global energy markets.
Brent crude, the international benchmark, fell 1.9 percent to $89.03 per barrel following a nearly 8 percent surge the previous day. West Texas Intermediate (WTI), the U.S. benchmark, dropped 1 percent to $83.59 per barrel. Market participants remain closely attentive to developments in the Strait of Hormuz, a vital chokepoint between Iran and Oman through which roughly one-fifth of the world’s oil supply passes. Additionally, the Iranian-backed Houthi militia in Yemen has intensified efforts to limit maritime traffic in the Bab al-Mandab Strait at the southern end of the Red Sea, a route Saudi Arabia has increasingly relied upon as an alternative to the Strait of Hormuz.
The heightened geopolitical risks followed renewed escalations between the United States and Iran, marked by reciprocal attacks, alongside Egypt’s confirmation that an unidentified drone was responsible for striking two ships docked in a Mediterranean port the previous day.
In financial markets, U.S. Treasury yields remained elevated on Thursday as investors weighed the Federal Reserve’s commitment to controlling inflation following its latest policy meeting. The Fed held interest rates steady for a fifth consecutive session on Wednesday, but dissent among policymakers was evident, with three voting to raise rates. The 30-year Treasury yield stood near 5.21 percent, close to a two-decade high reached the previous day, while the 10-year note yield climbed to 4.68 percent, its highest level since January 2025.
Analysts noted that signals from Fed Chairman Kevin Warsh were somewhat unclear, complicating market expectations. Short-term yields eased as investors lowered expectations for further hikes this year, but long-term yields continued to rise. Meanwhile, the Bank of England also maintained its interest rate unchanged on Thursday. Policymakers there cautioned that inflation may accelerate later in the year due to increasing energy costs, with three out of nine members voting for a rate increase.
Equity markets showed mixed results amid the volatility. The S&P 500 gained 1.7 percent, buoyed by a rebound in technology stocks. Asian markets had varied performances: the Nikkei 225 in Japan advanced 0.7 percent, while indexes in South Korea and Taiwan retreated, affected by semiconductor sector fluctuations. European stocks also edged higher, with the Stoxx 600 index rising 0.8 percent.
On the consumer side, gasoline prices ticked up by one cent to an average of $4.10 per gallon in the United States, driven by concerns over supply amid the conflict. This represents a 37 percent increase since the onset of the war. Diesel prices also rose by one cent to $5.34 per gallon, marking a 42 percent increase over the same period. Typically, gasoline and diesel prices lag movements in crude oil by several days.