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August WTI crude oil (CLQ25) is down $0.73 (-0.99%), and August RBOB gasoline (RBQ25) is down $0.0129 (-0.56%) as market reactions shift following recent geopolitical tensions. Initial spikes in crude prices to a 5-1/4 month high after the U.S. bombing of Iranian nuclear facilities subsided due to speculation that Iran’s retaliation will not severely disrupt oil supplies from the Middle East.
Iran’s army has warned of severe consequences for U.S. involvement in the conflict, although it has not yet attempted to close the strategically critical Strait of Hormuz, which manages 20% of the world’s daily crude shipments. Observers predict a price spike to $120-$150 per barrel if the strait is blocked. The latest OPEC+ agreements to increase production by 411,000 bpd for July and other indications of increased output have further pressured prices.
The American Automobile Association forecasted a record 61.6 million Americans will travel by car this Fourth of July holiday, reflecting stronger gasoline demand. However, crude oil inventories dropped by 10.2% below the seasonal average, and active U.S. oil rigs fell to 438, the lowest in 3 years, indicating mixed signals for future price movements.
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