Jens Asbjørn Bøgen
The US and Iran have launched a series of new attacks following an Irani attack on three vessels in the Strait of Hormuz.
A memorandum of understanding between the US and Iran, signed in mid-June, brought an end to fighting between the two countries, but that agreement now seems to be over.
Following an Iranian attack on three vessels in the Strait of Hormuz, the US has imposed sanctions on Iranian oil and carried out a series of “powerful strikes against Iran”, as US Central Command puts it.
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According to reports, the US has struck more than 80 Iranian targets, including 60 ships belonging to the Iranian Revolutionary Guard.
In retaliation, Iran has attacked 85 targets linked to the US military in various countries across the Middle East, throwing the fragile ceasefire into limbo.
And the energy markets have reacted sharply.
Oil jumps
Reuters reports that Brent crude futures climbed $1.92 to reach $76.08 a barrel.
At the same time, US West Texas Intermediate crude increased by $1.82 to settle at $72.26, reversing recent losses.
Both benchmarks had already jumped by roughly three per cent on Tuesday. This came after Washington cancelled a special licence that allowed the sale of certain crude supplies.
A fragile truce
Market experts warn that these new developments threaten a recently signed diplomatic agreement, completely changing how investors view regional stability.
Reporting on Wednesday, Reuters shared an analysis from commodity strategists at ING. “While the revocation doesn’t fundamentally change oil market dynamics, it’s important from a sentiment perspective. It heightens the risk of a breakdown in the temporary deal between the US and Iran,” the bank stated.
Tensions spiked after US Central Command confirmed that the American military had launched airstrikes in response to recent drone and missile attacks on three commercial ships.
Shipping lanes threatened
The strategic waterway remains a critical chokepoint. Before the conflict began in February, about one-fifth of the world’s energy supply passed through this narrow passage.
“The current conflagration is a reminder to the market of how fragile passage through the Strait still is,” said Saul Kavonic, head of research at MST Marquee.
He noted that the situation could force nervous traders to change their strategies quickly. “This presents a contrary indicator to the prevailing sentiment that the market could be flooded into oversupply, which may scare some of the record short positioning to cover,” Kavonic added.
Recent incidents have heightened these fears. Qatar blamed Iran for a drone strike on a gas tanker, while maritime security sources reported damage to a Saudi supertanker named the Wedyan.
Supplies running low
To make up for ongoing disruptions, countries have been drawing heavily on domestic stockpiles, driving down reserves worldwide.
Market sources cited data from the American Petroleum Institute showing another drop in US crude inventories last week. A poll conducted by Reuters revealed that analysts expected stockpiles to fall by roughly 2.4 million barrels for the week ending July 3.
