Oil prices recede after earlier gains as traders weigh U.S.-Iran latest

Oil prices edged lower Thursday, paring earlier gains after Mideast tensions flared up, with the U.S. attacking Iran and Tehran targeting Washington allies in the Gulf.

U.S. crude oil futures for July fell 0.5% to $89.57 per barrel. Futures for international benchmark Brent for August delivery fell 0.67% to $92.48 per barrel.

Kuwait shut its airspace and intercepted projectiles on Thursday, while Israel warned of launches from Lebanon toward communities in the country's north.

Iran's state-run Tasnim news agency said Tehran had struck several U.S. military facilities in Kuwait and Bahrain, including Ali Salem and Ahmad al-Jaber air bases in Kuwait and Sheikh Issa air base in Bahrain. Bahraini authorities said their air defense systems had intercepted and destroyed Iranian aerial threats.

The latest escalation followed U.S. strikes on Iranian military infrastructure ordered by President Donald Trump. U.S. Central Command said it targeted surveillance, communications and air defense assets that posed a threat to American forces and commercial shipping in regional waters.

In a post on X, the U.S. Central Command said American forces had started "launching additional self-defense strikes today at 5:15 p.m. ET against multiple targets in Iran at the Commander in Chief's direction." The military said the operation was carried out "in response to Iran's unwarranted and continued aggression."

Iranian state media, meanwhile, reported that Tehran had carried out missile and drone attacks against U.S. vessels operating in the Strait of Hormuz.

Trump earlier had warned that Washington would intensify its military response against Iran, as he continued to push Tehran toward reaching a deal with the United States.

Despite a fresh escalation in the U.S.-Iran conflict, Rystad Energy said Thursday that the oil market was better-positioned to absorb disruptions than in past crises, citing record U.S. crude exports, softer Chinese demand and alternative export routes that reduce reliance on the Strait of Hormuz. 

The consultancy's senior vice president Jorge Leon, however, warned that the chances of a near-term diplomatic breakthrough have diminished, leaving oil prices vulnerable to sharp swings as investors assess whether the latest hostilities will remain contained or evolve into a more prolonged conflict.