Crude oil prices fell on Thursday, snapping a two-day rally, after US President Donald Trump said Iranians want to reach a deal with Washington, raising expectations that the ongoing conflict between the two sides could end. Prices also retreated as investors moved to sell oil holdings and lock in profits following the sharp gains of the past two days.
West Texas Intermediate (WTI), the US benchmark crude, dropped 1.52 dollars, or 2.07%, to 72 dollars per barrel for August delivery.
In a development threatening the memorandum of understanding signed between the United States and Iran on 17 June for a 60-day ceasefire, the two countries exchanged attacks over the past two days.
Iran reopened the Strait of Hormuz following the signing of the memorandum, while the United States permitted Iran to export its oil until 21 August and lifted the blockade imposed on Iranian ports.
Oil prices had declined after the agreement as the war risk premium associated with the Gulf conflict began to ease, and oil-related inflationary pressures in major global economies also receded.
However, military confrontations resumed during the current week after 3 commercial vessels were attacked while transiting the Strait of Hormuz last Monday.
The US Treasury Department's Office of Foreign Assets Control also revoked the temporary licence for Iranian oil exports.
The renewed US-Iran confrontation drove crude oil prices higher over the past two days.
Investors are now anticipating a temporary halt to the attacks, inferring from Trump's remarks that he intends to pursue a diplomatic path to end the crisis while using military threats to pressure Iran.
On the economic front, minutes from last month's US Federal Reserve meeting, published on Wednesday, revealed that a majority of policymakers believe interest rate increases could be warranted if inflation remains elevated as a result of heavy investment in artificial intelligence, the Gulf war, or the impact of tariffs on US imports.