Brent near $90 as Iran war keeps Oil markets volatile

Brent oil prices edged lower as the European session got underway, trading around the $90 mark, very close to the previous session’s close. Volatility in energy markets, driven by the war in Iran and the resulting fears of prolonged disruption in the Strait of Hormuz, has been the central story for financial market participants since the start of the conflict at the end of February. After a steep rally that saw the price of a barrel rise to nearly $120, there was an equally sharp correction that brought prices back to around $90. Such moves indicate that traders remain unsettled by the uncertainty generated by the conflict and are reacting quickly and strongly to developments and news. For now, the prevailing mood is one of cautious optimism that de-escalation may be possible in the short to medium term, allowing for the return of some normality in the flow of oil exports from the Gulf. Adding to this sentiment were reports that Saudi Arabia could increase output via the Red Sea pipeline, as well as speculation that the IEA may soon begin releasing oil from its strategic reserves in order to ease pressure in the markets. Against this backdrop of lingering uncertainty but also some optimism, oil traders will continue to monitor developments closely, and further volatility cannot be ruled out.