Oil prices surged by over 3% on Tuesday, extending gains post-settlement, following Iranian attacks on three commercial vessels in the Strait of Hormuz and the subsequent revocation by the US of a general license authorizing the sale of Iranian crude oil. Brent crude futures settled up $2.17, or 3.01%, to $74.16 a barrel, while US West Texas Intermediate (WTI) crude rose $1.89, or 2.76%, to $70.44 a barrel. Both benchmarks were up more than 5% from the previous day's settlement prices after the US move and military strikes against Iran in response to the vessel attacks.
The US revocation of the oil license, which had been issued in June as part of a fragile ceasefire agreement, has until July 17 to wind down transactions. This action came amidst mourning ceremonies in Iran for the slain Supreme Leader Ayatollah Ali Khamenei. The attacks included a Qatari LNG tanker, the Al Rekayyat, hit by a drone, and a Saudi-flagged crude oil tanker, the Wedyan, damaged off Oman. Qatar blamed Iran for the attacks, though Iran denied responsibility, implying vessels were using uncoordinated routes.
The renewed tensions threaten the interim peace agreement signed in June between the US and Iran, which aimed to end the Iran war and reopen the Strait of Hormuz. The Strait, a crucial global chokepoint, previously transported a fifth of the world's daily oil and LNG supply. Iran's Foreign Minister Abbas Araghchi stated that negotiations for a final deal would not proceed if US threats continued, directly responding to US President Donald Trump's threat to "finish the job" if a deal wasn't made.
Analysts expressed concerns about market volatility. Ajay Parmar, director of energy and refining at ICIS, noted that further attacks could sporadically appear, with even a threat to close the Strait of Hormuz again potentially causing significant price spikes. UBS analyst Giovanni Staunovo also warned that renewed Middle East tensions and concerns over vessel attacks could lead to lower oil exports from the region, adding to market instability. Mizuho's Bob Yawger suggested Iran's actions could be a show of strength or an attempt to assert authority over the Strait, further complicating the already delicate diplomatic situation.
