Oil prices fell, Thursday, after continued inflation led to a decline in optimism regarding the interest rate cut, but they remained near their highest levels in six months as traders prepared for a possible attack by Iran on Israeli interests.

By 1220 GMT, Brent crude futures fell 20 cents, or 0.2 percent, to $90.28 per barrel, and US West Texas Intermediate crude futures fell 30 cents, or 0.3 percent, to $85.91 per barrel.

Vikas Dwivedi, global energy strategist at Macquarie Group, said, “We believe that it will be difficult to maintain the Brent price above $90 in the second half of 2024 without actual supply disruption linked to geopolitical events.”

He added, "As a result, we expect oil prices to decline throughout the year as a result of increased supplies from outside OPEC, the return of a large amount of OPEC+ surplus capacity to the market, and the possibility that continued inflation will lead to a decline in demand."

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The minutes of the Federal Reserve meeting showed that officials are concerned that progress on inflation may stall and that there is a need to extend tight monetary policy for a longer period to curb inflation in the world's largest economy.

Investors, who had previously expected a cut in interest rates in June, see September as the most likely time for the start of the monetary easing cycle after the release of stronger-than-expected data on consumer price inflation for the third time in a row.

Continuing high interest rates for a longer period may weaken economic growth and suppress demand for oil.

The Middle East region is awaiting a possible Iranian response following a suspected Israeli air attack on the Iranian embassy in Syria at the beginning of the month.

Earlier this week, Israel and Hamas began a new round of negotiations over their more than six-month-old war in Gaza, but those discussions did not result in any agreement.

IJ's Yip Jun Rong said, "Prices remain sensitive to geopolitical developments in the Middle East, as market participants price in the risk of supply disruptions if tension persists for a longer period."

Traders are currently awaiting the release of the oil market report from the International Energy Agency tomorrow, Friday.