Oil prices settled lower by 2 per cent on Thursday as uncertainty over prospects for resolving the US-Israel conflict with Iran weighed on the market, with Brent crude futures trading at $102.58 a barrel after it shed $2.44 or 2.3 per cent, and the US West Texas Intermediate (WTI) futures at $96.35 per barrel after it lost $1.9 or 1.9 per cent.
Prices had earlier surged on reports that Iran’s supreme leader issued a directive that dented hopes for a swift resolution to the war, before reversing course later in the day.
The directive from Supreme Leader Ayatollah Mojtaba Khamenei could further complicate negotiations and frustrate US President Donald Trump’s efforts to broker an end to the war.
President Trump then later said the US will eventually recover Iran’s stockpile of highly enriched uranium, which the US believes is destined for a nuclear weapon, though Tehran says it is intended purely for peaceful purposes.
Meanwhile, Iran has announced a new “Persian Gulf Strait Authority,” which would oversee a “controlled maritime zone” in the Strait of Hormuz, the key waterway that controls about 20 per cent of crude and gas flows. It also warned against further attacks and unveiled steps to entrench its control of the strait, which remains mostly closed.
Economic activity in the Euro zone shrank at its sharpest rate in more than 2-1/2 years in May as a war-driven surge in living costs hammered demand for services across Europe, and firms accelerated layoffs.
Seven leading oil-producing countries in the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will likely agree to a modest hike in July output when they meet on June 7. The monthly target set by the members is expected to be raised by about 188,000 barrels per day, a figure which has been trimmed since May after the United Arab Emirates (UAE) left the group.
OPEC+ held output steady in the first quarter of 2026 but has raised its target each month since April, despite the war. Despite the hikes, the war has reduced oil production to 33.19 million barrels per day in April from 42.77 million barrels per day in February, with output by Gulf producers falling by 9.9 million barrels per day.
In the US, an Energy Information Administration (EIA) report on Wednesday showed that the country withdrew nearly 10 million barrels of oil from its Strategic Petroleum Reserve (SPR) last week for its biggest drawdown on record. US crude inventories also fell by more than expected last week, according to EIA data.
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