Crude oil prices experienced a notable weekly decline in the global commodity market, largely attributed to Israel’s retaliatory strikes against Iran.
This development, coupled with reports indicating the US Federal Reserve’s intention to maintain higher interest rates for an extended period, contributed to the downward trend.
Investor concerns were further fueled by economic data highlighting subdued demand in the US, the world’s largest oil consumer.
The recent escalation of tensions in the Middle East following Israel’s counterattacks on Iran added to market uncertainty, prompting a significant drop in oil prices.
ICE Brent crude saw a decline of 4.5% to $86.44 per barrel by Friday, compared to the previous week when it surpassed $90 per barrel. Similarly, West Texas Intermediate (WTI), the American benchmark, traded at $82.12 per barrel, marking a 4.1% decrease from the previous week’s session.
The prospect of the Fed maintaining interest rates at current levels was underscored by statements from key officials.
New York Fed President John Williams emphasised the need for economic activity to guide rate adjustments, while Atlanta Fed President Raphael Bostic noted the gradual return of inflation to target levels.
Expectations for interest rate cuts by the Fed were tempered, with a 23% chance of reduction in June, increasing to 49% in July and 71% in September, as per market sentiment.
Meanwhile, data from the Energy Information Administration (EIA) revealed a higher-than-expected increase in US commercial crude oil stocks, signalling weakened demand.
This, coupled with a rise in strategic petroleum reserves, further dampened market sentiment and contributed to the decline in oil prices.
Tensions between Iran and Israel heightened following retaliatory actions, although Iranian authorities downplayed the situation. Israel’s airstrikes on Iranian targets were met with Iranian missile launches, leading to concerns over the escalating conflict.
However, Iranian officials attributed the reported explosions in key cities to routine air defence activities, asserting the safety of military and nuclear facilities.