Oil price surges as US-Iran escalation sparks fresh supply fears
Oil prices rose by almost 2% on Wednesday after the United States launched airstrikes on Iran and reinstated sanctions on Iranian crude exports, fuelling concerns that the fragile ceasefire between the two countries could collapse and disrupt oil supplies from the Middle East.
According to the U.S. Central Command, the strikes were carried out in retaliation for Iranian attacks on three commercial vessels navigating the Strait of Hormuz, a vital shipping route for global oil exports.
By 0128 GMT, Brent crude futures had climbed $1.38, or 1.9%, to $75.54 per barrel, while U.S. West Texas Intermediate (WTI) crude gained $1.37, or 1.9%, to trade at $71.81 per barrel.
Both benchmark prices had already advanced by about 3% on Tuesday after Washington revoked the general licence that had permitted the sale of Iranian crude in response to the reported attacks.
Saul Kavonic, Head of Research at MST Marquee, said the latest developments highlighted the continued vulnerability of shipping through the Strait of Hormuz.
He noted that the renewed tensions challenge expectations that the oil market could soon face an oversupply, potentially forcing traders with large short positions to reassess their bets on falling prices.
Kavonic added that if the security situation deteriorates further and shipping traffic through the Strait remains below half of pre-conflict levels, tighter supplies could continue to drive oil prices higher.
Oil prices had retreated to pre-conflict levels after the United States and Iran agreed to a ceasefire last month, prompting many traders to build substantial short positions amid expectations that additional Middle Eastern oil would return to the market.
Although Iran has not claimed responsibility for the attacks on the vessels, Qatar blamed Tehran for the incidents, including an attack on a Qatari liquefied natural gas tanker that reportedly caught fire after being struck by a drone.
Maritime security sources also reported damage to a Saudi-flagged crude oil tanker, believed to be the supertanker Wedyan, off the coast of Oman, although the exact cause has not yet been confirmed.
The incidents have reignited concerns about the security of the Strait of Hormuz, which accounted for roughly one-fifth of global energy shipments before the conflict erupted in February.
Iran has reportedly instructed vessels to follow shipping lanes closer to its coastline instead of routes nearer Oman, while the United States has maintained that the strategic waterway must remain open to international navigation.
Since the conflict began, several countries have relied on strategic oil reserves to offset supply disruptions.
Meanwhile, market sources citing data from the American Petroleum Institute (API) said U.S. crude inventories declined again last week, exceeding analysts’ expectations of a 2.4 million-barrel drawdown for the week ending July 3.
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