Oil prices moved higher again on Thursday after renewed attacks in the Persian Gulf disrupted investor optimism surrounding a possible US-Iran peace agreement. The rebound highlights how fragile sentiment remains across global energy markets, even after crude prices posted steep declines earlier in the week on expectations that diplomatic negotiations could eventually reopen the Strait of Hormuz.

Brent crude traded near $96 per barrel after dropping more than 5% during Wednesday’s session, while traders reassessed geopolitical risks following new military exchanges involving American and Iranian forces near one of the world’s most strategically important shipping corridors.

The renewed escalation underscores how closely global inflation expectations, monetary policy forecasts, and broader market sentiment remain tied to developments in the Middle East conflict, which has now entered its fourth month.

Fresh Gulf Tensions Reignite Supply Concerns

According to US officials, American forces shot down four Iranian drones targeting a commercial vessel and also struck a launch unit positioned near the Strait of Hormuz. Iranian state media later reported that Tehran responded by targeting the American base connected to the operation.

Separately, Kuwaiti air defense systems reportedly responded to additional missile and drone threats, intensifying fears that the fragile ceasefire framework could rapidly deteriorate.

The Strait of Hormuz remains partially blocked under what analysts describe as a dual pressure campaign involving both Tehran and Washington. The corridor normally handles roughly one-fifth of global oil and liquefied natural gas flows during peacetime, making any disruption highly significant for energy markets worldwide.

Although crude prices remain below levels seen earlier this week, traders are increasingly questioning whether negotiations can deliver a lasting resolution quickly enough to restore stable shipping activity.

Inventory Drawdowns Deepen Market Tightness

Beyond the geopolitical headlines, tightening physical supply conditions are adding further support to oil prices. The American Petroleum Institute reported another major drawdown in US crude stockpiles, with nationwide inventories falling by approximately 2.8 million barrels last week.

Declining inventories at Cushing, Oklahoma — one of the key US storage hubs — further reinforced concerns that global energy markets remain structurally tight despite softer demand signals from some major economies.

Analysts note that strategic petroleum reserve releases and weaker Chinese imports have temporarily helped offset some supply disruptions caused by the conflict. However, many believe that cushion could begin disappearing within weeks.

Rabobank strategist Joe DeLaura warned that if Chinese import demand strengthens again while emergency reserve releases fade, refined fuel markets could experience a sharp upward price acceleration by mid-July.

Diplomatic Uncertainty Continues Driving Volatility

Investors remain cautiously optimistic that Washington and Tehran can still reach a framework agreement capable of reopening Hormuz and reducing military tensions. However, major sticking points remain unresolved, particularly surrounding Iran’s nuclear program and Tehran’s demand to maintain influence over shipping activity through the strait.

The US Treasury also announced new sanctions targeting the Persian Gulf Strait Authority, accusing the organization of illegally profiting from maritime toll collections tied to regional shipping routes.

For financial markets, the broader concern extends beyond oil itself. Sustained energy price volatility continues feeding inflation risks at a time when major central banks are already reconsidering the possibility of additional interest rate hikes.

Looking ahead, traders will remain highly sensitive to both military developments and diplomatic signals from Washington and Tehran. Any sign of ceasefire deterioration could quickly push crude prices sharply higher again, while credible progress toward reopening Hormuz may restore confidence across global equity, bond, and currency markets.