U.S. launches new round of attacks against Iran, Oil prices rise as conflicts intensify in the Middle East
Oil prices continued to rise after the U.S. announced on Wednesday that it had launched a new wave of attacks against Iranian military facilities. Iran is threatening to further block vital sea lanes. The attacks aim to limit Tehran’s ability to attack commercial ships in the Strait of Hormuz.
Washington reimposed a naval blockade on Iranian ports in response to Iran's threat to close all other export corridors that benefit the U.S. and its allies.
Brent futures rose 18 cents, or 0.2%, to $84.91 a barrel at 12:14 GMT. WTI crude futures rose 26 cents, or 0.3%, to $79.60 a barrel.
Oil prices closed 2% higher on Tuesday, reaching a one-month high, due to the attacks that further worsened supply disruptions in the Strait of Hormuz.
Hostilities between Iran and the U.S. flared up again last week, breaking a fragile ceasefire reached in June after months of conflict.
Late Tuesday, the U.S. military announced it had struck dozens of military targets in the strategic waterway and Iranian coastal areas in a seven-hour offensive.
In response, Iran's Islamic Revolutionary Guard Corps said on Wednesday it had struck U.S. military targets in the region, including in Bahrain, Kuwait, and Jordan.
The U.S. military said on Wednesday that its new attacks on Iranian coastal defense systems and cruise missile storage and launch sites were "designed to further weaken the military capabilities that Iranian forces use to attack commercial vessels in the Strait of Hormuz."
Analysts noted that Iran has signaled it could use its Houthi allies in Yemen to close the Bab el-Mandeb Strait to the Red Sea, potentially opening a new front against Washington and jeopardizing two of the world's most vital energy arteries.
The US naval blockade of ships entering and leaving Iranian ports has further strengthened oil prices.
Iranian crude oil exports have been around 1.5 to 2 million barrels per day in the last two weeks.
Following the signing of the US-Iran memorandum of understanding in June, Gulf exports reached more than 80% of pre-war levels, but fell below 50% last week, to around 11 million barrels per day.
If the recovery in Gulf exports continues to stall, Brent oil is likely to surpass $110 in the fourth quarter of this year.
Nevertheless, investors are hesitant to put too much of a premium on oil prices given the volatile news.
This is all part of the war game, and the market has learned to adopt a somewhat optimistic approach to such major announcements, as many recent market shocks have often not materialized as expected.
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