Oil prices experienced a significant jump, with Brent crude futures settling 3.01% higher at $74.16 a barrel and U.S. West Texas Intermediate (WTI) crude rising 2.76% to $70.44 a barrel. Following the settlement, both benchmarks extended gains, with Brent climbing to $75.88 and WTI jumping to $72.20, after the US revoked a general license authorizing the sale of Iranian oil.
The surge was triggered by reports that Iran had attacked three commercial vessels in the Strait of Hormuz. The US subsequently launched strikes against Iran in response to these attacks. Analysts, such as Ajay Parmar of ICIS, noted the fragility of the ceasefire and predicted continued volatility, while Giovanni Staunovo of UBS highlighted concerns about lower oil exports from the Middle East. The Strait of Hormuz is a critical chokepoint, through which a fifth of the world's daily oil and LNG supply passes.
This escalation comes despite Washington and Tehran previously agreeing to an interim peace deal, which had seen oil prices fall 30% in the second quarter and erased a war premium. The revocation of the oil sales license, while a strong signal from the US, is not expected to completely halt Iran's oil exports, which are a vital source of revenue, especially to China. The move puts a fragile diplomatic understanding between the two nations on shaky ground, raising the risk of further disruption to negotiations for a broader agreement.
