NEW YORK: Oil prices slid by more than 2 percent on Thursday on worries that inflation and a slowing economy could weigh on oil demand even as the growing conflict between the US and Iran limits supply by delaying a full reopening of the Strait of Hormuz.
About 20 percent of global oil supplies passed through the strait before the Iran war. Brent futures fell USD1.92, or 2.5 percent, to USD76.10 a barrel at 1:26 p.m. EDT (1726 GMT). US West Texas Intermediate crude fell USD1.61, or 2.2 percent, to USD71.91.
On Wednesday, Brent closed at its highest since June 19 and WTI closed at its highest since June 22. Iranian armed forces launched attacks on US military infrastructure in Gulf states on Thursday following US strikes on Iran’s southern coastal and eastern provinces, further straining a three-week-old ceasefire agreement.
READ MORE: Oil rises as US-Iran conflict clouds peace prospects
The attacks came on the day that Iran buried its slain Supreme Leader Ayatollah Ali Khamenei at the shrine of Mashhad, the culmination of a week of mass funeral processions and rallies. Khamenei was killed on the first day of the war on February 28.
“We expect the renewed tension in the Middle East between the US and Iran to be relatively short-lived because both countries are constrained by practical economic and political realities,” Vikas Dwivedi, global energy strategist at Macquarie Group, said in a note. Iran’s Revolutionary Guards Navy said the US attacks and intervention in redirecting shipping through the Strait of Hormuz were disrupting the waterway’s gradual reopening.
“Our estimated oil flows from the Persian Gulf recovered to above 80 percent of pre-war flows within the first 10 days after Hormuz reopening as trapped tankers rushed to leave the Persian Gulf, but retreated to the low-70s percent of normal following recent attacks on tankers,” analysts at US bank Goldman Sachs said in a report.
In the US, the number of Americans filing claims for unemployment benefits fell last week, supporting economists’ views that the labor market remained in a “slow-hire, slow-fire” mode, despite a sharp slowdown in job growth in June.