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Oil falls as investors weigh chance of US intervention in Iran-Israel conflict

Oil prices slipped on Thursday.

Oil falls as investors weigh chance of US intervention in Iran-Israel conflict

Oil prices slipped on Thursday as investors hesitated to take new positions after US President Donald Trump gave mixed signals on the country's potential involvement in the ongoing Israel-Iran conflict.


Brent crude futures fell 37 cents, or 0.48 per cent, to US$76.33 a barrel by 0110 GMT after gaining 0.3 per cent in the previous session marked by high volatility, with prices falling as much as 2.7 per cent.


US West Texas Intermediate crude for July fell 28 cents, or 0.37 per cent to US$74.86 a barrel, after settling up 0.4 per cent in the previous despite dropping by as much as 2.4 per cent.


The July contract expires on Friday and the more active August contract was down 21 cents, or 0.29 per cent, to US$73.29 a barrel.


There is still a "healthy risk premium baked into the price as traders await to see whether the next stage of the Israel-Iran conflict is a US strike or peace talks", Tony Sycamore, market analyst at IG, said in a note.


The former could lead prices to rise by US$5 while peace talks could lead to a drop of around the same magnitude, Sycamore said.


Trump on Wednesday told reporters that he may or may not decide for the US to join Israel in its missile attacks on Iran. The conflict stretched into its seventh day on Thursday.


Direct US involvement would widen the conflict, putting energy infrastructure in the region at higher risk of attack, analysts say.


Iran is OPEC's third-largest producer, extracting about 3.3 million barrels per day (bpd) of crude oil. But more crucially, about 19 million bpd of oil and oil products move through the key Strait of Hormuz waterway and there is widespread concern the fighting could disrupt trade flows there.


The US Federal Reserve kept interest rates steady on Wednesday but pencilled in two rate cuts by the end of the year. Chair Jerome Powell however cautioned the rate cuts would be "data-dependent" and that more consumer inflation is expected from President Trump's planned import tariffs.


Lower interest rates would stimulate the economy, and as a result demand for oil, but that could exacerbate inflation.



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