Brent crude futures fell 37 cents, or 0.48%, to $76.33 a barrel by 0110 GMT after gaining 0.3% in the previous session marked by high volatility, with prices falling as much as 2.7%.
U.S. West Texas Intermediate crude for July fell 28 cents, or 0.37% to $74.86 a barrel, after settling up 0.4% in the previous despite dropping by as much as 2.4%.
The July contract expires on Friday and the more active August contract was down 21 cents, or 0.29%, to $73.29 a barrel.
There is still a “healthy risk premium baked into the price as traders await to see whether the next stage of the Israel-Iran conflict is a U.S. strike or peace talks”, Tony Sycamore, market analyst at IG, said in a note.
The former could lead prices to rise by $5 while peace talks could lead to a drop of around the same magnitude, Sycamore said. Trump on Wednesday told reporters that he may or may not decide for the U.S. to join Israel in its missile attacks on Iran. The conflict stretched into its seventh day on Thursday. Direct U.S. involvement would widen the conflict, putting energy infrastructure in the region at higher risk of attack, analysts say.
Iran is OPEC’s third-largest producer, extracting about 3.3 million barrels per day (bpd) of crude oil. But more crucially, about 19 million bpd of oil and oil products move through the key Strait of Hormuz waterway and there is widespread concern the fighting could disrupt trade flows there.
The U.S. Federal Reserve kept interest rates steady on Wednesday but pencilled in two rate cuts by the end of the year. Chair Jerome Powell however cautioned the rate cuts would be “data-dependent” and that more consumer inflation is expected from President Trump’s planned import tariffs.
Lower interest rates would stimulate the economy, and as a result demand for oil, but that could exacerbate inflation.
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