Oil slides as U.S. strike prospect on Iran fades

Oil futures eased in Asian trade as markets pared back the risk premium that had built earlier in the week when widespread protests in Iran and signals of possible U.S. military action raised fears of supply disruption. Prices retreated from multi-month highs after U.S. President Donald Trump said, "We’ve been told that the killing in Iran is stopping," remarks that eased immediate expectations of strikes and prompted a rapid unwinding of geopolitical-driven gains.

At 0418 GMT Brent was trading at $63.55 per barrel, down 21 cents, or 0.3 percent, while U.S. West Texas Intermediate stood at $59.04, down 15 cents, or 0.3 percent. Earlier snapshots showed slightly different intraday moves: one print put Brent near $63.73 and WTI at $59.22, while another captured Brent at $64.26 and U.S. WTI at $59.67. A sharper intraday reversal the previous session saw Brent tumble more than 4 percent to about $63.40 and WTI near $59 as traders scaled back risk premia after Washington’s change in tone.

The swing illustrates how quickly oil markets are digesting geopolitical signals. Both benchmarks had spiked earlier in the week as protests in Iran stoked concerns about possible disruptions to Iranian crude flows and raised the prospect of tighter physical markets. Market participants remain sensitive to the region because the Strait of Hormuz is a critical chokepoint through which roughly 20 million barrels per day pass, and Iran produces more than 3 million barrels per day with exports of about 1.5 million barrels per day.

Analysts offered a mix of caution and restraint on the outlook. "Given the potential political upheaval in Iran, oil prices are likely to experience greater volatility as markets digest the potential for supply disruptions," BMI analysts warned. IG analysts said risks had eased somewhat but "remain significant, keeping the market nervous in the short term." Citi raised its Brent forecast to $70 per barrel over the next three months while noting the protests had not yet affected Iran’s main oil-producing areas and that current risks were more logistical and political than immediately physical. By contrast, Phillip Nova analyst Priyanka Sachdeva noted the broader balance still pointed to "ample supply," suggesting prices could stay range-bound absent a revival in Chinese demand or meaningful physical bottlenecks.

Domestically, a market poll indicated U.S. crude stockpiles were expected to have declined last week, while gasoline and distillate inventories were likely to rise, a mix that adds nuance to near-term market tightness. Traders also flagged the recent near-10 percent rise in futures over a five-session span prior to the pullback, underscoring how rapid gains can reverse when geopolitical risk eases.

The immediate takeaway for markets is familiar: geopolitical headlines can lift prices quickly, but sustained moves depend on tangible disruptions to flows or a shift in demand. With analysts divided between heightened short-term volatility and expectations of ample supply for the year, oil is likely to remain sensitive to developments in Tehran and to announcements that alter the perceived likelihood of disruptions through the Strait of Hormuz.