Oil prices rose as Washington reimposed sanctions on Tehran
The fragile truce broke down as the US and Iran exchanged airstrikes and Washington reimposed sanctions on crude oil sales to Tehran. Oil prices surged more than 3% on Wednesday, fueling concerns that supply to the Middle East could be disrupted again.
Brent crude futures rose $2.40, or 3.2%, to $76.56 a barrel at 06:45 GMT. WTI crude also rose $2.26, or 3.2%, to $72.70 a barrel.
Both indicators rose nearly 3% on Tuesday after the US revoked the general license allowing the sale of Iranian crude oil.
While the revocation doesn't fundamentally change oil market dynamics, it's significant in terms of sentiment. It increases the risk of the temporary agreement between the US and Iran collapsing. The current conflict is a reminder to the market how fragile passage through the Strait of Hormuz is.
The US Central Command said Tuesday that US airstrikes were in response to Iranian attacks on three commercial vessels passing through the Strait of Hormuz. The Iranian Revolutionary Guard, meanwhile, announced earlier Wednesday that it had targeted US military facilities in Bahrain and Kuwait.
This comes at a time when the market is expected to be flooded with oversupply, potentially leading to the closing of some record-high short positions.
If tensions persist and traffic through the waterway remains below 50% of pre-war levels, the resulting supply constraints could support higher oil prices.
Iran has not claimed responsibility for the ship attacks, but Qatar has blamed Iran for attacks on several vessels, including a Qatari-owned liquefied natural gas tanker.
According to sources, a crude oil tanker believed to be flying the Saudi Arabian flag was also damaged off the coast of Oman. The cause is not yet clear.
The attacks have reignited concerns about tanker traffic through the Strait of Hormuz, which, before the war began in February, carried cargo equivalent to about a fifth of the global energy supply.
Iran is strengthening its control over the Strait. The U.S. insists the waterway should remain open to all, as it was before the conflict began.
Since the war started, countries have reduced their stockpiles to make up for supply shortages.
According to data from the American Petroleum Institute (API), U.S. crude oil inventories fell again last week. Analysts had expected a decrease of about 2.4 million barrels in crude oil inventories for the week ending July 3.
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