Oil prices fell Thursday after Saudi Arabia proposed a naval coalition to protect key trade routes as ships come under attack from Iran and its allies in the Red Sea and Strait of Hormuz.
Brent crude futures, the international benchmark, lost nearly 2% to close at $89.03 a barrel. U.S. West Texas Intermediate futures fell about 1% to settle at $83.59 per barrel.
The Saudi Defense Ministry said more than 40 countries attended a meeting to discuss “strengthening maritime defense cooperation and unifying efforts to protect the security of maritime passages,” according to statement translated from Arabic.
The effort to forge a naval alliance comes as Iran’s Houthi allies in Yemen declared a maritime embargo of Saudi Arabia last week. Iran has repeatedly attacked ships transiting the Strait of Hormuz.
Brent oil gained nearly 8% Wednesday as fighting in the Middle East escalates. The U.S. launched a “heavy wave” of strikes against Iran late Wednesday in retaliation for missile attacks on American forces in the region. Iran’s Islamic Revolutionary Guard Corps has threatened further escalation in response.
Egypt, meanwhile, said two ships were hit by a drone attack at the Port of Damietta on the Mediterranean. Damietta is the site of a liquefied natural gas hub. Nobody has claimed responsibility for the attack.
The resumption of strikes marks the latest turn in a conflict that has whipsawed oil markets and disrupted shipping through the Strait of Hormuz since fighting erupted in late February. The U.S. had halted two weeks of fire against Iranian targets last weekend, as diplomats sought to give peace talks “space.”
But Trump telegraphed the retaliation hours earlier, warning of plans to order heavy strikes on Iran. “We’ll be hitting them hard. They’re going to get a beating,” Trump told a Fox News reporter early Wednesday.
U.S. Central Command described the operation as a “powerful response” to Tuesday’s attempted Iranian attacks on U.S. forces in the Middle East.
The two-hour-long attacks saw the U.S. hit dozens of Islamic Revolutionary Guard Corps targets across Iran, including military command centers, missile and drone facilities, coastal surveillance and defense sites, and maritime capabilities, Centcom said.
Traders are looking ahead to the OPEC+ meeting on Sunday, during which the group of oil producers is expected to announce a supply increase of 188,000 barrels per day for September.
“The big uncertainty through 2027 will be around the group’s policy, with the potential for pushback on output quotas,” ING strategists wrote in a note on Wednesday.
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