Oil prices drop after surge, as traders weigh Middle East tensions and trade risks

Dubai: Oil prices recently pulled back after surging earlier this week, with Brent crude dropping to around $69 per barrel. This change happened after the market reacted to a mix of geopolitical tensions in the Middle East and concerns over trade issues. Here’s why this shift occurred:

Earlier in the week, oil prices jumped sharply when tensions flared between the US and Iran. Iran warned it could attack US military bases if nuclear talks failed, and the US took precautionary steps by evacuating some of its embassy staff in Iraq. This uncertainty raised fears of potential disruptions in oil supplies, as the Strait of Hormuz, a vital shipping route for oil, is located near this region.

Although the price spike initially seemed to reflect these geopolitical risks, analysts believed the surge might have been overdone. After the jump, traders started to reassess whether the risks were truly as high as initially feared, leading to a pullback in oil prices.

Trade war concerns add pressure

In addition to the Middle East tensions, oil traders were also focused on trade risks. US President Donald Trump announced plans to impose new tariffs on certain countries, which could slow global trade and impact the demand for oil. This added another layer of uncertainty, causing traders to become more cautious and pull back from riskier investments like oil.

Oil prices have been particularly sensitive to geopolitical and trade-related developments lately. This week’s retreat highlights just how volatile the market can be when tensions rise in the Middle East or when trade issues emerge. For now, traders will continue to monitor both of these factors closely.

In summary, while oil prices surged earlier due to rising Middle East tensions, concerns about the overreaction and renewed trade risks led to a retreat in prices. With a fragile balance in place, oil markets will remain vulnerable to sudden changes in these key areas.

- With inputs from Bloomberg