Oil prices rose more than 3% on Tuesday, continuing to rebound from a sudden rise in hostilities in the Middle East, after extended trading after-hours. The market rampage came after Iran struck three commercial ships in the Strait of Hormuz, forcing the United States to pull back on a general license to sell Iranian crude oil.
Brent crude futures opened higher by 3.01 percent to $74.16 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were up 2.76 percent to $70.44. In post-settlement trading, both indexes rose over 5% from their closing level the day before after the U.S. Department of the Treasury officially pulled the waiver for oil sales.
U.S. Central Command said the American military conducted a series of strikes in response to the attacks on the maritime industry, but did not provide details.U.S. Central Command confirmed that the American military retaliated against Iranian targets, but did not elaborate.
Fragile Ceasefire Shaken by Escalating Tensions
The conflicts pose serious threats to the preliminary deal reached by U.S. and Iran in June to end the current standoff and reopen the Strait of Hornuz. It is not clear if the attacks on ships were a signal of force during the mourning of slain Iranian supreme leader Ayatollah Ali Khamenei, or if it was a tactic to make a point over the water that Iran was in control, analysts say.
Some market experts still think a wider diplomatic deal can be reached, but without the escalation. Washington’s action was a message that Tehran had crossed a line, said Bob Yawger of energy futures at Mizuho, but ending the nuclear deal would be in both countries’ economic best interests.
The diplomatic landscape is still very fragile, however. Iran’s foreign minister announced that negotiations will be immediately suspended if the U.S. keeps threatening to take “the final step” to “finish the job” if an agreement isn’t reached. The Strait of Hormuz, which before the war supplied a fifth of the world’s daily oil and gas and LNG trade, is under the investor’s spotlight.
Meanwhile, in other global energy news, Kyiv has claimed a success against the Russians with Ukrainian drones hitting eight tankers of their “shadow fleet”. The Ministry of Defence of Ukraine claimed that these are “senile” ships were being deployed to smuggle fuel to the occupied Crimea under cover of the night.
Meanwhile, U.S. supplies eased a little in the domestic market. Crude oil stock dropped by 399,000 barrels last week, according to industry data. Now traders are waiting for official storage numbers from the U.S. Energy Information Administration on Wednesday to verify the overall supply picture.
