Oil prices were little changed on Thursday as markets assessed the impact of fresh U.S. strikes on Iran, which could hinder progress on talks to end their war and allow for the full reopening of the key Strait of Hormuz.
Brent crude futures rose 6 cents, or 0.1%, to $78.08 a barrel by 0710 GMT. U.S. West Texas Intermediate crude futures rose 13 cents, or 0.2%, at $73.65 a barrel.
Both crude benchmarks, WTI and Brent, rose more than a dollar in post-settlement trade on Wednesday after the U.S. military began launching fresh strikes on Iran.
Before that, the benchmarks had settled at their highest in over two weeks after U.S. President Donald Trump threatened new attacks on Iran.
Before the latest flare-up in the U.S.-Iranian war, prices had been falling as the market tried to absorb the pent-up Middle Eastern supply released by the truce and some signs of rising inventories.
"WTI is likely to remain highly volatile in the short term. If U.S.-Iran tensions persist or escalate further, oil prices could extend their gains" to as much as $80 a barrel, said Linh Tran, a market analyst at forex trading platform XS.com in a note.
"If the risks in the Middle East ease, the market could shift its focus back to fundamental factors such as rising U.S. inventories, high domestic production" and major producers' plans to increase output.
Last week, U.S. crude inventories rose for the first time since mid-April as exports softened, the Energy Information Administration said on Wednesday.
But in the latest spasm of conflict that drove prices higher, the U.S. military said it completed strikes on Iran aimed at keeping the critical Strait of Hormuz open to traffic, hours after President Donald Trump declared that an interim agreement to end the war was "over".
U.S. forces struck about 90 Iranian military targets, which included air defence systems, coastal surveillance assets, missile and drone storage sites, naval capabilities, and military logistics infrastructure along Iran's coastline, U.S. Central Command said.
Iran earlier said on Wednesday it attacked U.S. military sites in Bahrain and Kuwait in response to earlier U.S. strikes on infrastructure.
A fifth of global oil and liquefied natural gas supplies traversed the Strait of Hormuz prior to the Iran war, and Tehran's control of the waterway has been its main leverage in a conflict that started with U.S. and Israeli airstrikes against Iran on February 28.
Despite the interim peace deal between Washington and Tehran, "significant geopolitical risks remain," said DBS Bank's head of energy research Suvro Sarkar, expecting conflict uncertainty to support prices in the near term.
"We believe Iran has every incentive to prolong these discussions, suggesting that the war risk premium in oil prices may not fully dissipate for several months, leading to continued volatility despite an overall downward price trajectory in the medium term." - Reuters
