International Oil Prices Plunge 3% Amid Middle East Risk Easing and Powell's Hawkish Remarks

International oil prices plunged 3% as Middle East risks, which had escalated due to Iran's attack on Israel, somewhat eased. The market is watching the extent of additional sanctions on Iranian oil that could trigger a future uptrend.

On the 17th (local time), the closing price of June delivery Brent crude futures on the ICE Futures Exchange was $87.29 per barrel, down $2.73 (-3.0%) from the previous close. This is the first time in four trading days since the 11th that Brent crude futures prices have fallen to the $80-per-barrel range at closing. Brent crude had surged to $92 per barrel on the 12th amid recent supply shortage concerns and escalating tensions in the Middle East.

At the New York Mercantile Exchange, May delivery West Texas Intermediate (WTI) crude closed at $82.69 per barrel, down $2.67 (3.13%). This is the lowest price since the 27th of last month.

After Iran's attack on mainland Israel over the weekend of the 13th-14th, tensions in the Middle East peaked and then eased into a lull, which triggered the sharp drop in oil prices. Israel has warned of painful retaliation but has not yet taken concrete action, while Western countries including the United States are collectively urging Israel to exercise restraint.

John Evans, a researcher at oil brokerage PVM, said, "The oil market is reversing the risk premium that had been priced in due to the war and refocusing on industry fundamentals."

Jerome Powell, chairman of the U.S. Federal Reserve (Fed), hinted the previous day at a delay in interest rate cuts, which was also seen as a factor in the oil price decline. Rising bond yields could increase concerns about future oil demand reductions.

However, the possibility of economic sanctions on Iran by the United States and the European Union (EU) could lead to an increase in oil prices. Energy consulting firm ClearView Energy Partners recently stated in a memo that if the U.S. Congress passes additional sanctions legislation on Iranian oil, international oil prices could rise by an additional $8.40 per barrel.