Crude Prices Slip As Investors Eye Middle East Tensions Following US Order To Evacuate Non-Essential Personnel

Crude oil prices fell nearly 2% on Thursday even as tensions in the Middle East rose following an order by the U.S. government to evacuate non-essential personnel from the region.

This follows a run of over 4% on Wednesday, which pushed WTI and Brent to their highest levels in two months.

Thursday’s decline in oil prices comes amid reports of Israel being ready to strike Iran as nuclear talks between the United States and Iran appear to have stalled over the past few days.

According to a Reuters report, Trump told reporters that the administration has ordered the evacuation because the Middle East “could be a dangerous place.”

As for Iran making a nuclear weapon, Trump said: “They can't have a nuclear weapon. Very simple, they can't have a nuclear weapon.”

U.S. West Texas Intermediate (WTI) futures traded 0.9% lower at $67.55 per barrel at the time of writing, after recovering from the day’s lows.

Brent futures fell 0.8% to $69.21 per barrel.

"Geopolitical risk premia tend to fade if there are no supply disruptions. We are still higher than two days ago as some short investors prefer to stay on the sidelines amid the uncertainty," said Giovanni Staunovo, an analyst at UBS, according to a Reuters report.

Investors appeared to remain cautiously optimistic on Thursday, with the Dow Jones up 0.03% and the S&P 500 gaining 0.30%.

Gold prices, on the other hand, edged up amid rising geopolitical tensions – spot prices of the yellow metal rose 0.8% to $3,382 an ounce at the time of writing.

Earlier on Wednesday, the U.K. Navy issued an advisory, warning that increased tensions in the Middle East could hit shipping. It advised vessels to exercise caution while navigating through the Gulf.

Analysts at ING think that the OPEC+ decision to hike production in July by 411,000 barrels per day could be adding to the downward pressure on oil prices.

“The large increases from OPEC+ will push the global oil market into a large surplus from the fourth quarter of this year onwards, which is why we see Brent trading lower towards the end of this year,” the firm said in a recent note.

Meanwhile, crude oil ETFs surged over 2.5% on Thursday before losing most of the gains.

The United States Oil Fund LP (USO) was up 0.04%, while the ProShares Ultra Bloomberg Crude Oil (UCO) was 0.3% higher at the time of writing.

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