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Crude benchmarks dropped roughly 2% Thursday, as systemic demand anxieties comfortably eclipsed Middle Eastern supply risks.

The international Brent contract shed $1.72 (2.2%) to settle at $76.30 a barrel, while US WTI fell $1.44 (2.0%) to $72.08, aggressively rejecting Wednesday's post-settlement spike.

The sell-off was anchored by hawkish US Federal Reserve minutes signalling persistent inflation and sustained, demand-cooling interest rate trajectories.

Structural weakness within the petrochemical engine heavily compounded the bearish tape. Chinese producer price inflation spiked to a four-year high in June, severely squeezing regional manufacturing margins.

With weak domestic end-use consumption stripping plastic converters of pricing power, this demand-side deterioration neutralised physical Gulf disruptions—even as retaliatory Iranian strikes dragged Strait of Hormuz transit volumes back to the low-70s% of pre-war baselines.

While macro headwinds dictate prompt pricing, secondary product-side shocks maintain a firm floor under refined components. Ukrainian drone operations disabled 12 additional Russian tankers in the Sea of Azov overnight, exacerbating structural tightness following Moscow’s sweeping diesel export ban.

However, with diplomatic backchannels actively working to de-escalate US-Iran kinetic exchanges, financial participants remain strictly focused on global demand destruction.

Written by: Aiman Haikal