Oil prices moved lower on Thursday, while hopes of a diplomatic resolution to the tensions in the Middle East remain despite the latest military operations.
The limited scope of the overnight strikes and the indications that talks are ongoing could continue to push crude prices down.
However, underlying market conditions could mitigate downside risks, as energy flows through the Strait of Hormuz remain constrained.
Therefore, even if diplomatic progress is achieved, it is unlikely that operating conditions will return to pre-tensions levels immediately, which could limit the scale of price corrections.
Meanwhile, US crude inventories have continued to decline sharply, with industry data pointing to an eighth consecutive weekly drawdown, reinforcing concerns that global stockpiles remain under pressure.
Looking ahead, oil markets are likely to remain focused on both geopolitical developments and inventory data. While renewed progress in negotiations could weigh on prices, persistent supply constraints and tightening inventories may continue to provide an underlying floor to the market.
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