Oil Prices Drop 3 Percent, Market Still Uncertain Whether Iran War Will End Soon

JAKARTA - World oil prices fell more than 3 percent on Wednesday after markets were again shaken by uncertainty over the conflict in the Middle East. Hopes that the US-Israeli war against Iran would soon subside had lifted prices, but they did not last long.

According to a report by Arab News quoted on Thursday, April 2, the Brent contract for June delivery fell by US$3.33 or 3.2 percent to US$100.64 per barrel at 09.41 Saudi time. Meanwhile, US West Texas Intermediate (WTI) crude for May weakened by US$3.34 or 3.3 percent to US$98.04 per barrel.

Throughout the trading, the price had strengthened. However, the market direction reversed after investors chose to secure profits amid the still uncertain situation.

LSEG senior analyst Emril Jamil, quoted by Arab News, said the decline was triggered by a trading pause in the Asian session, accompanied by profit-taking after signals from the United States that the war could end in the near future.

A day earlier, Brent prices also closed down more than US$3 after unconfirmed media reports that the Iranian President was ready to end the war.

US President Donald Trump on Tuesday said the military operation could be ended in two to three weeks. He also said Iran did not have to make a deal to stop the conflict. The statement is the clearest signal so far that Washington wants to end the month-long war.

However, the market has not been able to breathe a sigh of relief. A number of analysts assess that even if the conflict subsides, damage to energy infrastructure still risks holding back supplies.

Senior market analyst at Phillip Nova, Priyanka Sachdeva, was still quoted from Arab News as saying that the next movement of oil prices depends very much on how quickly the supply chain recovers. According to him, tanker traffic will not immediately return to normal. Shipping costs, insurance premiums, and vessel movements still need time to recover. The level of damage to oil facilities can only be calculated after the situation has calmed down.

According to a report by The Wall Street Journal, Trump also signaled that the war could be ended before the Strait of Hormuz reopened. This route is vital because it is used by about 20 percent of the world's oil and liquefied natural gas trade.

In its note, LSEG assessed that the supply risk remained high. The diplomatic channel is indeed said to be still open. However, no real progress has been seen, while attacks at sea are still ongoing and threats to energy assets have not receded.

Pressure on supplies is also seen from the production side. A Reuters survey showed OPEC's oil production in March fell 7.3 million barrels per day from the previous month, due to forced export cuts after the closure of the strait. In the United States, crude oil production in January also recorded the largest decline in two years after a winter storm hit many areas.