Oil prices increased by more than 5% on Wednesday 8 July, hitting a two-week high after US President Donald Trump said the peace deal with Iran was over, reviving fears of supply disruptions in the Middle East.
Before Trump’s comments prices had already begun climbing as Iran and the US exchanged airstrikes and Washington reinstated sanctions targeting Tehran’s crude exports.
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By 08:32 GMT, Brent futures had increased by $3.82, or 5.15%, to $77.98 a barrel (bbl), reported Reuters.
Meanwhile, US West Texas Intermediate (WTI) had gained $3.70, or 5.25%, to $74.14/bbl.
One of the reasons for the price gains was the US Government revoking a general licence on Tuesday that had authorised the sale of Iranian crude oil.
The revocation shortens the previous wind-down period for Iranian oil sales, which had been set until 21 August, to a new end date of 17 July, reported Reuters.
According to US Central Command, the US military carried out airstrikes in response to alleged attacks by Iran on three commercial vessels transiting the Strait of Hormuz.
In turn, Iran’s Revolutionary Guards reported targeting US military sites in Bahrain and Kuwait early on Wednesday.
Iran has not accepted responsibility for the attacks on vessels, but Qatar blamed Tehran for the incident involving a Qatari LNG tanker, which sustained engine room damage from a drone strike.
The attacks have again heightened concern about safe passage through the Strait of Hormuz, a key maritime corridor that previously handled around one-fifth of global energy shipments before the war began in February.
A US official said attacks on vessels in the Strait were “wholly unacceptable” and reiterated that further action may follow.
Prior to the latest strikes, oil prices had fallen to pre-war levels and traders increased short positions in anticipation of higher supply.
Despite past US sanctions, Iran has continued to export oil, mainly to China.
In a related development, Saudi Arabia is in early talks with neighbouring countries over expanding the capacity of its East-West oil pipeline to the Red Sea, reported Reuters, citing sources.
The pipeline, which could move up to seven million barrels per day (mbbl/d), has become increasingly important since shipments through the Strait of Hormuz were affected earlier this year.
The potential expansion could add up to 2mbbl/d in capacity, although timing and costs remain uncertain.
Prior to the latest attacks, flows through the Strait of Hormuz had partially resumed after last month’s preliminary agreement between the US and Iran but remained below previous levels.
