Oil prices were relatively volatile as markets assessed the impact of the geopolitical developments in the Middle East.
Caution could dominate as the next steps in the diplomatic process seem to be in jeopardy.
The increase in tensions between the US and Iran and the resurgence in military operations could lead to new disruptions and alter the outlook for the market.
Interruptions in navigation across the Strait of Hormuz could affect the recovery in energy flows from the region, keeping the physical market thigh and limiting the downside risk for crude prices.
At the same time, the Trump administration withdrew a temporary waiver that had allowed Iran to export its oil, further tightening the supply outlook.
Oil prices are likely to remain highly sensitive to how current tensions evolve. Should they continue to escalate, renewed upside pressure could build over the coming sessions. Conversely, any signs that the latest flare-up is being contained, or that a path back to dialogue is opening, crude prices could continue to decline.
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