Oil prices fell by more than a dollar on Thursday as analysts lowered global oil demand forecasts for 2026. This decline is linked to disruptions caused by the war between the US and Israel concerning Iran, although supply constraints related to this conflict maintained a minimal level of market prices.
The Organization of the Petroleum Exporting Countries (OPEC), in its monthly oil market report published on Wednesday, reduced its forecast for global oil demand growth in 2026 to 580,000 barrels per day.
On the same day, the International Energy Agency stated that it expects a reduction in consumption of 1.6 million barrels per day this year. This figure is higher than projected last month (1 million barrels per day), driven by fuel supply limitations and rising prices due to the war between the US and Israel against Iran, which has restricted demand.
Pressure on oil prices was also exerted by an unexpected increase in crude oil reserves in the US. The Energy Information Administration reported on Wednesday that last week, commercial crude oil stocks in the US reached the largest weekly increase since January 2023, while exports fell.
Nevertheless, the ongoing stalemate in negotiations between Iran and the US to end the war in the Persian Gulf kept prices at a high level. Attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday, which are critical routes for Middle Eastern oil and gas exports, highlight persistent risks to crude oil supplies from the region.
Analysts from Haitong Futures noted that 'the security situation for navigation in these waters has worsened further, forcing vessels to switch off their signals, which reduces transparency in shipping and makes it difficult for the market to track and assess actual supply levels.'
In other news, Israeli Defense Minister Yoav Gallant visited southern Lebanon on Wednesday. He stated his intention to maintain troops in the so-called 'security zone' and reported that the Israeli army is 'destroying underground infrastructure' in the area and 'destroying all houses.'
Lebanese Prime Minister Najib Mikati condemned Israel's 'systematic destruction' in the southern part of the country as a violation of international law. Mikati stated that 'attacks, invasions, demolitions, and systematic destruction of homes, infrastructure, government buildings, and places of worship' by Israel 'constitute a serious violation of the principles and rules of international and humanitarian law.'
On Wednesday, US President Donald Trump insisted that Washington controls the vital Strait of Hormuz. In a post on his social platform Truth Social, Trump stated: 'I think we will keep it' and reiterated his claim that the Iranian fleet and air force had been destroyed.
Previously, Trump told news outlets that he retains the ability to strike Iran but prefers to emphasize the economic damage inflicted on the country through economic sanctions, according to AFP.
In Lebanon, Prime Minister Najib Mikati condemned Israel's 'systematic destruction' in the south of the country as a violation of international law, while the Israeli Defense Minister claimed his military is 'destroying all houses' there, as reported by AFP.
Meanwhile, on another front in the Red Sea, Pakistan's Foreign Minister reported that three Pakistani citizens were killed in an attack by Houthi rebels.
Oil prices plummeted on Monday following a statement by US President Donald Trump about preparing new negotiations with Iran aimed at ending the war in the Middle East, which also contributed to the rise of the stock market.
Crude oil futures fell by more than six percent, despite Iran denying any ongoing negotiations. Meanwhile, the Japanese yen strengthened against the dollar after US and Japanese authorities confirmed on Monday their purchase of the Japanese currency in open markets after several months of weakness.
Although a weaker yen benefits major exporters such as Sony or Toyota, it also increases import costs for Japan, and the main Japanese stock index fell by almost one percent on Monday.
In Asian markets, technology companies suffered significant losses again as traders worry whether massive investments in artificial intelligence will lead to long-term profits. Chip manufacturers SK hynix and Samsung dragged down South Korea's Kospi index after Friday's rally.
European stock markets, which have fewer technology companies compared to their Asian and American counterparts, generally showed steady growth. However, London stabilized after the share price of one of its largest constituents, pharmaceutical group AstraZeneca, dropped by five percent due to reports of a possible merger with US competitor Bristol Myers Squibb.
Besides geopolitical risks, attention is also focused on the prospects of the US economy after the Federal Reserve kept interest rates unchanged last week, despite calls from some of its officials to raise rates to combat inflation.
Kathleen Brooks, research director at trading platform XTB, noted: 'The main focus this week will be on the US nonfarm payroll report, which will be another test of the resilience of the US labor market.'
In currency markets, the dollar showed mixed dynamics: it rose against the pound sterling and the euro, but sharply fell against the yen after rare joint intervention by the US and Japan.
The yen surged late last week after being near its weakest level against the dollar since 1986, driven by higher US interest rates, rising oil prices, and constant capital outflow from Japan.
Despite Monday's drop, oil prices remain significantly higher than levels observed before the United States and Israel launched attacks against Iran, triggering a war that sharply reduced oil and other key product exports from the Persian Gulf.
Trump stated that the latest negotiations between the US and Iran would concern the Strait of Hormuz, which has become a major sticking point in the conflict. His announcement followed threats to 'hit Iran very hard' and reportedly considered resuming attacks, including on energy infrastructure. He withdrew this threat on Saturday, stating that 'perimeters' of the deal exist.
Analysts note that the decline in oil prices was supported by an agreement between Saudi Arabia, Russia, and five other OPEC+ members to increase production by 188,000 barrels per day starting in September.
