A former ambassador to Yemen says such an attempt would draw "international anger": File Image/Pixabay

Despite Tehran asking the Houthi movement in Yemen to prep for closing the Red Sea to oil transit in retaliation for the continued U.S. bombing of Iran, oil prices on Thursday settled about 1 percent lower.

Brent settled down 72 cents, or about 0.9 percent, to $84.23 per barrel, and West Texas Intermediate settled down 65 cents, or 0.8 percent, at $78.95 per barrel.

Ed Hayden-Briffett, oil research analyst for The Officials, explained the dip by remarking, "Investor positioning in the oil market was very short when the situation started to worsen in the Middle East this week, and that seems to have slowed as investors that got burnt in the rally cut their short positions earlier in the week."

Analysts worried over the prospect of another waterway being blocked (the Houthis will supposedly shut the Bab el-Mandeb gateway if the U.S. bombs Iranian power infrastructure): “This threat raises the serious risk of both of the Middle East's primary oil export routes being disrupted at the same time," said Alex Hodes, director of energy market strategy at StoneX.

Wael Makarem, financial markets strategist lead at Exness, agreed, adding that blocking ⁠Bab el-Mandeb “would significantly amplify supply chain stress.”

But Edmund Fitton-Brown, a former British ambassador to Yemen and senior fellow at the Foundation for Defense of Democracies, said such a strategy would “likely draw international anger and likely result in Israeli and U.S. strikes on Sana’a and Hodeida.”

Thursday also saw discussions about just how much the U.S./Iran war could grow among analysts concerned with fundamentals as well as those swayed by sentiment; they seemed to be assured by U.S. vice-president J.D. Vance declaring that a ground war was out of the question, but Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, told  media, “While mediation efforts by neighbouring countries continue and the consensus view is that a full-scale war is unlikely, WTI could still rise to $85–$87 depending on how the conflict develops.”

For its part, Goldman Sachs covered all bases: it said Brent could exceed $110 in the fourth quarter if the Gulf export recovery continues to stall, but could fall into the $60s by year-end if tensions ease.

In other oil news on Thursday, Chevron was preparing to sign two memoranda of understanding that will move it closer to developing Iraq’s West Qurna 2 oilfield and the Nassiriya project.

The company is also reportedly working with Iraq on technical studies for new export pipelines that would allow crude to reach the Mediterranean without passing through the Strait of Hormuz.