Analysts and traders are struggling to respond to rapidly changing oil prices as conflicting developments regarding the war in Iran contribute to large swings practically on a daily basis.
Callum Macpherson, head of commodities at Investec, said investors are finding it "incredibly hard" to interpret market signals amid contradictory statements from Washington and Tehran, CNBC reported.
Macpherson pointed to reports that Iranian officials had discussed a memorandum of understanding involving possible areas of agreement with the United States, only for the White House later to reject those claims. Posterior reports claimed that parties have reached a potential deal that needs to be approved by senior leadership.
"It's very hard for the markets to know how to react to all of this," Macpherson told CNBC. "There are real consumers and producers and refiners that need to trade, that need to hedge themselves, and buy cargoes. Prices have to be made."
According to the U.S. Energy Information Administration, roughly one-fifth of the world's petroleum liquids consumption moves through the Strait of Hormuz, making any disruption in the area closely watched by traders and governments worldwide. Shipping activity through the route has faced growing scrutiny since attacks and retaliatory strikes intensified in the region.
Oil markets have also reacted to concerns over commercial shipping safety in the Gulf region following missile and drone strikes as well as the boarding of vessels trying to cross. Several shipping companies and insurers have reportedly reassessed routes and risk exposure in recent weeks as tensions increased.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, told the outlet that crude prices in the low-to-mid $90 range reflect what traders view as a continuing geopolitical risk premium attached to the conflict.
"For now, the market looks caught between short-term nerves over renewed hostilities and a lingering hope that both sides still have enough incentive to get energy flows moving," Britzman said.
"The bigger picture is that crude is still on course for a second weekly decline, suggesting investors are not yet pricing in a worst-case disruption," he added.
Analysts at OCBC Group Research also highlighted concerns tied to infrastructure risks and shipping disruptions near the Strait of Hormuz, Reuters reported.
"Infrastructure damage, renewed strategic stockpiling, and a higher structural risk premium will likely keep prices sticky," Sim Moh Siong, FX strategist at OCBC Group Research, said in comments cited by Reuters.
The International Energy Agency said in a recent market update that geopolitical instability remains one of the biggest drivers influencing short-term oil price movements as traders monitor supply risks alongside global demand conditions. The agency also noted that spare production capacity among major oil-producing countries has helped offset some fears of immediate shortages.
Some analysts said oil traders are also weighing signals from OPEC+ producers, including Saudi Arabia and Russia, as the alliance continues managing production levels against a backdrop of geopolitical uncertainty and fluctuating global demand.
Despite continued market swings, analysts noted that physical oil trading and shipping operations have continued, although under heightened security and insurance concerns.
"It's all about having confidence that the war definitely has ended and we're not going to have another flare-up," Macpherson said.
