Oil prices surged following reports of fresh attacks on vessels in the Strait of Hormuz, rekindling fears about supply disruptions in the critical waterway. Brent crude futures settled up $2.17, or 3.01%, to $74.16 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.89, or 2.76%, to $70.44 a barrel. Post-settlement, Brent climbed to $75.88 and WTI to $72.20, both up over 5% from the previous day's settlement prices, after the U.S. revoked a general license authorizing the sale of Iranian oil and launched new strikes against Iran.
The attacks included an LNG tanker, Al Rekayyat, and a Saudi-flagged crude oil tanker, believed to be the supertanker Wedyan, both damaged near the Strait of Hormuz. Initially, a tanker traveling south reported being hit about 8 nautical miles east of Limah, Oman, causing a fire. Axios also reported that Iran fired at least two missiles at commercial ships, citing a U.S. official. The U.S. military responded to these Iranian attacks with a series of strikes against Iranian targets.
The U.S. Treasury, which issued a general license on June 22 allowing the sale of Iranian crude and petrochemical products until August 21 as part of an interim peace deal, revoked this license on Tuesday. Iran was given until July 17 to wind down any transactions. This move is seen as a significant blow to the fragile ceasefire agreement between the U.S. and Iran, which had eased supply disruption concerns and led to a 30% drop in oil prices during the second quarter. Analysts, such as Ajay Parmar of ICIS, warned that the ceasefire remains highly fragile, and further attacks could lead to increased volatility, especially if Iran threatens to close the Strait of Hormuz again.
Despite the immediate price surge driven by geopolitical tensions, the broader market outlook remains less supportive. Charu Chanana, chief investment strategist at Saxo Markets, noted that OPEC+ continues to raise output, Gulf supplies are recovering, and the Brent-Dubai market structure has shifted into contango, signaling a looser near-term physical market. Warren Patterson, head of commodities strategy for ING Groep NV, stated that while a contained U.S. response might offer short-term support, any bounce is likely to be short-lived given bearish sentiment and weakness in the physical market. Saudi Aramco also announced a reduction in its Arab Light to Asia for next month by $11 a barrel to $1.50 below a benchmark, following OPEC+'s decision to raise output quotas.
Investors continue to monitor talks between the U.S. and Iran, and their implications for shipping through the Strait of Hormuz, a crucial chokepoint that previously transported a fifth of the world's daily supply of oil and LNG. The upcoming U.S. Energy Information Administration's Short-Term Energy Outlook is also anticipated to provide further insights into market conditions. Last month, the EIA had raised its 2027 forecast for U.S. crude production by 220,000 barrels a day to 13.83 million barrels per day.
