Despite a U.S./Iran ceasefire all but obliterated by full-out strikes and counterstrikes in the past 24 hours, oil on Thursday experienced a 2 percent decline, based on fears that rising inflation could negatively impact energy demand.
Brent settled down $1.72, or 2.2 percent, at $76.30 per barrel, and West Texas Intermediate settled down $1.44, or 2 percent, at $72.08.
The latest strain against the 60-day ceasefire was Iranian forces launching attacks on U.S. military assets in Gulf states; this was in retaliation for a series of U.S. strikes against the Islamic republic, which in themselves were payback for Iran attacking commercial vessels in the Strait of Hormuz.
Yet, as Iran unfurled massive banners during the burial of its slain supreme leader Ayatollah Khamenei vowing to kill U.S. president Donald Trump, some analysts held that any further escalation was unlikely.
Vikas Dwivedi, global energy strategist at Macquarie Group, wrote in a note, “We expect the renewed tension in the Middle East between the U.S. and Iran to be relatively short-lived because both countries are constrained by practical economic and political realities.”
John Williams, president of the New York Federal Reserve, said Thursday that he believed the market’s expectation for oil prices to continue to ease over the next six to 12 months despite the geopolitical tensions was “a pretty reasonable baseline”; he added that “the fundamentals are that energy prices are likely to be around their peak and then to come down over time.”
In other oil news on Thursday, the U.S. Energy Information Administration disclosed that U.S. crude oil production, including lease condensate, averaged a record 13.6 million barrels per day (bpd) last year, cementing the country’s status as the world’s biggest crude producer.
Production from Texas and New Mexico rose 4 percent last year to 6.6 million bpd, nearly half of total U.S. crude output; also, the overall output was achieved despite lower prices (with WTI averaging $65 per barrel in 2025) and due to higher drilling productivity and efficiency.
Also on Thursday, Ukraine continued its aerial bombardment of Russian oil assets, the latest round of attacks resulting in two tankers being hit in Taganrog Bay, the northeastern arm of the Sea of Azov in the Rostov region.
Ukraine is now reportedly targeting fuel supply routes and vessels as part of a campaign to force Russian refineries out of operation.