Oil prices saw an uptick on Tuesday, with Brent crude futures rising by 1.1% to $72.77 a barrel and U.S. West Texas Intermediate crude futures advancing by 1.1% to $69.30 a barrel. This surge followed reports of renewed missile strikes in the Strait of Hormuz. Axios reported, citing U.S. officials, that Iran's military fired at least two missiles at commercial ships transiting the strait on Monday night, effectively ending a week-long pause in attacks. The U.S. is expected to retaliate against Iranian targets.
The attacks occurred shortly after a one-week agreement between Washington and Tehran to suspend hostilities in the strait expired, undermining a memorandum of understanding signed less than three weeks prior. The UK Maritime Trade Operations agency also disclosed a report from a tanker near the Omani coast that was hit by an unidentified projectile, causing a fire. This vessel was later identified as the Al Rekayyat, a Qatari natural gas carrier. Analysts from Deutsche Bank, including Henry Allen, noted that despite oil prices returning to pre-conflict levels, the Strait of Hormuz is still only seeing a fraction of its normal traffic, indicating ongoing supply chain stress. Charu Chanana, chief investment strategist at Saxo Markets, commented that these attacks serve as a reminder of the fragility of the Middle East's de-escalation efforts, suggesting the market might reintroduce some "Hormuz risk premium" but not yet price in a full disruption.
The increase in oil prices was partially offset by signals of growing global oil supplies. On Sunday, OPEC+ members, including Saudi Arabia, agreed to boost their production targets by 188,000 barrels per day starting in August, following similar increases in June and July. Additionally, Saudi Aramco, the world's largest oil producer, cut the August official selling price of its flagship Arab Light crude for Asia to a discount against the regional benchmark, a move not seen since 2020. This action underscores the intensifying competition for market share as Gulf exports begin to recover. The United Arab Emirates also reported increasing its crude production by over 3.8 million barrels per day in June, surpassing pre-Iran war levels.
Oil prices had previously retreated significantly, falling by 30% in the second quarter, after an interim peace deal was signed between Washington and Tehran in June. This deal had eased fears of supply disruptions from the Middle East. However, the recent attacks in the Strait of Hormuz highlight that normalization is still far off, according to Warren Patterson, head of commodities strategy for ING Groep. He suggested that while a contained U.S. response might offer short-term support, any bounce would likely be brief given the overall bearish sentiment and weakness in the physical market.
