By Joke Kujenya
OIL PRICES slipped in Asian trade after a sharp 4% rise in the previous session, as traders balanced potential supply shocks linked to Middle East tensions against uncertainty surrounding U.S. Federal Reserve monetary policy.
Brent crude futures dropped by 35 cents, or 0.5%, to $76.10 per barrel by 0723 GMT, while U.S. West Texas Intermediate (WTI) crude slid 23 cents, or 0.3%, to $74.61. Both benchmarks had shown modest early gains of up to 0.5% before reversing course.
Heightened concerns over disruptions in the Strait of Hormuz, a vital maritime route for about 20% of global seaborne oil, continue to drive volatility. Iran, a key OPEC member, produces roughly 3.3 million barrels per day, but analysts note that spare capacity across OPEC and its allies could absorb a shortfall if Iranian exports were curtailed.
A client note from Fitch pointed to upward pressure on prices should Iranian infrastructure face material disruption. Yet, the agency observed that the bloc’s collective spare output—approximately 5.7 million barrels per day—offers a substantial buffer in the event of escalation.
U.S. President Donald Trump on Tuesday called for Iran’s “unconditional surrender” amid deepening regional tensions.
Simultaneously, Israeli defence capabilities have come under scrutiny, with the Wall Street Journal reporting limited supplies of “Arrow” missile interceptors, citing an unnamed U.S. official.
Despite geopolitical strains, technical analysts maintained a bullish short-term view on WTI.
Market observers highlighted relatively low net long positions among large speculators, while others pointed to rising risk premiums tied to Middle Eastern unrest.
Focus also remains on the U.S. Federal Reserve, which enters the second day of its policy meeting. Expectations suggest the benchmark rate will be held steady between 4.25% and 4.50%.
However, analysts including those at IG suggest that prolonged instability in the region could prompt the Fed to adopt a more dovish tone, possibly accelerating a rate cut timeline to July instead of September.
Lower interest rates typically stimulate economic activity and boost energy demand. Yet, potential inflationary pressures from elevated oil prices may complicate the central bank’s decisions in the months ahead.
