Oil prices retreated slightly on Thursday, settling about 1 percent lower, yet remained near their highest levels since mid-June as the escalating conflict between Iran and the United States threatened to choke off two of the Middle East's primary oil export routes simultaneously. Brent crude fell 72 cents to $84.23 a barrel, while West Texas Intermediate dropped 65 cents to $78.95, after both contracts hit session highs earlier in the day. Main Developments Thursday's decline reflected the market losing some steam after prices reached one-month highs earlier this week, according to Ed Hayden-Briffett, an oil research analyst at The Officials. He noted that investor positioning had been very short when the situation began worsening in the Middle East, and the rally slowed as investors who got burnt cut their short positions earlier in the week. On Wednesday, both Brent and WTI had settled at their highest levels since mid-June. The fragile truce reached in June has now collapsed, disrupting energy flows through the Strait of Hormuz, which handled about a fifth of daily global oil and LNG trade before the war began. Read also: US Airstrikes in Iran Hit Airport, Bridges, and Railway Hub Background Iran has asked Yemen's Houthi movement to be prepared to close the Red Sea oil export route if the US strikes Iranian power infrastructure, three sources told Reuters. This week, US President Donald Trump repeated oft-stated threats to strike Iranian power plants and bridges. On Wednesday, the US struck Iran's coastal defenses and missile sites after reimposing a naval blockade of its ports. Tehran threatened to shut off more regional energy exports, describing the conflict as an "existential war" with America. Iran and the US exchanged intensified fire on Thursday, which kept upward pressure on prices. About 7.4 million barrels of petroleum transited Bab el-Mandeb per day in June, about 7 percent of global oil output, according to Kpler data, up from 4.2 million bpd last year. Why It Matters With the Strait of Hormuz already closed, the threat to the Red Sea route 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 brokerage StoneX. Simultaneous disruptions affecting Hormuz and Bab el-Mandeb would significantly amplify supply chain stress, increase tanker availability constraints, and raise insurance premiums, according to Wael Makarem, financial markets strategist lead at Exness. What's Next Weighing on prices was Iran's release of a US citizen, which could point toward a path to avert the resumption of all-out war. On the supply side, Iraqi crude loadings more than doubled to average roughly 1.2 million barrels per day in the first half of July, according to Kpler data and a source with direct knowledge of the flows, as exports accelerated following months of restricted shipments.