Cancelled military strikes and downstream refining buffers deflate oil benchmarks amid conflicting Hormuz blockades

Oil prices retreated Thursday as the cancellation of immediate US airstrikes against Iran unwound prompt geopolitical risk premiums.

Brent futures fell $2.72 (2.9%) to settle at $90.38 a barrel, while U.S. WTI crude slid $2.32 (2.6%) to close at $87.71.

The paper liquidation followed executive disclosures that planned kinetic operations were suspended due to high-level diplomatic advancements, though Iranian state media quickly countered that no framework text has been formally approved.

Physical supply channels exhibit acute operational contradictions despite Tehran declaring the absolute closure of the Strait of Hormuz to all commercial traffic. US naval tracking confirmed that international merchant vessels continue localized transits, verified by three dark liquefied natural gas carriers slipping through the chokepoint toward Asian processing destinations with transponders deactivated. This highly selective maritime movement occurs alongside escalating friction in the Gulf of Oman, where a third vessel incident was logged off the Port of Shinas this week.

The systemic macro easing is heavily buffered by structural downstream inventory coverage in key consumption hubs. Indian refiners confirmed they have successfully secured sufficient crude feedstock to maintain processing runs through at least August, effectively insulating localized petrochemical complexes from prompt supply shocks.

This demand-side insulation temporarily overshadowed the underlying tightness in western balances, where official EIA data verified a 7.2 million-barrel draw in US commercial stockpiles to 426.5 million barrels.

Written by: Aiman Haikal