Oil Prices Slip After Geopolitical Spike Amid US-Iran Tensions and Trade Hopes

Oil prices edged lower in early Asian trading on Thursday, easing after a sharp rally fueled by escalating tensions between the U.S. and Iran. Brent crude futures dipped 0.4% to $69.47 a barrel, while West Texas Intermediate (WTI) fell 0.4% to $67.95, retracing part of Wednesday’s 4% surge.

The previous session’s rally was driven by geopolitical risks after the U.S. authorized voluntary departures of military dependents from bases in Bahrain and Kuwait. This move, amid rising tensions with Iran, sparked fears of potential disruptions to crude supply across the Gulf—a key global oil hub. U.S. President Donald Trump expressed doubt about reaching a nuclear deal with Iran, warning that military options remain if talks fail. Iran's defense minister responded by threatening retaliation against U.S. bases in the region.

Oil markets reacted swiftly to the heightened risk of conflict, as any escalation could impact key shipping lanes and energy infrastructure, adding a geopolitical risk premium to crude prices.

Meanwhile, investor sentiment was also influenced by progress in U.S.-China trade negotiations. President Trump stated that a framework deal is “done,” pending final approval by him and Chinese President Xi Jinping. The deal includes export licenses for China’s rare earth minerals and allows Chinese students to remain in the U.S., while maintaining existing tariffs on both sides.

Trump also noted that letters will soon be sent to major trade partners, outlining “take it or leave it” terms ahead of a July 9 deadline tied to the suspension of broader “liberation day” tariffs.

The easing of trade uncertainty has improved the global economic outlook, potentially boosting future oil demand. However, geopolitical risks remain a key driver of near-term price volatility.