- Crude oil futures slip as dollar soars after Fed’s cautious tone.
- Geopolitical concerns may keep oil prices supported.
- Trump tariffs continue to threaten global growth outlook, weighing on oil demand.
The crude oil futures slipped on Thursday from the $75.00 level as traders weighed the intensifying Iran-Israel conflict along with a slightly hawkish Fed stance. Despite a significant pullback, the price stays around the 5-month high due to fear of supply disruption in the Middle East, especially around the Hormuz Strait. Around 20 million barrels of oil and other refined products pass through this critical chokepoint.
The Iran-Israel conflict has entered its seventh day, intensifying with time as Israel targeted key Iranian infrastructure, including the Arak heavy water reactor. Iran retaliated and launched missile attacks on hospitals and major cities. Now, the threat of US intervention in this war looms large as President Trump has already approved military action, as per reports, but awaits in hope of a diplomatic solution. Analysts warn that US strikes can significantly escalate the conflict, risking the Gulf’s oil infrastructure.
According to Goldman Sachs, the Brent prices already have an estimated $10 per barrel risk premium embedded that could push prices above $90 if the conflict widens. The market has been jittery and sensitive to headline risks.
On the macroeconomic front, the Fed kept rates unchanged as expected during its last meeting. However, it reaffirmed two rate cuts by the end of 2025. The Fed’s tone was cautious as Powell stated that inflation is still above targets and future cuts depend on labor market data and inflation. Meanwhile, Trump tariffs may pause the inflation decline.
The US dollar found modest strength after the Fed’s statement, putting pressure on oil prices. Moreover, Trump’s ambiguous trade policies are shaking the global growth outlook and dampening oil demand.
