Oil prices climbed sharply on Tuesday after Washington revoked a general license that had authorized sales of Iranian crude oil and as reports emerged of attacks on vessels near the Strait of Hormuz.
Brent crude futures settled up $2.17, or 3.01 percent, at $74.16 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.89, or 2.76 percent, to $70.44 a barrel.
In trading after the official settlement, the global benchmark Brent gained an additional 96 cents to $75.12 and WTI was up $1.05 to $71.49 as of 3:00 p.m. ET, following the U.S. decision to revoke the general license that had authorized the sale of Iranian oil. Both benchmarks were more than 4 percent higher than the previous day’s settlement levels.
The U.S. described Iran’s recent actions in the Strait of Hormuz as "wholly unacceptable" and warned they would be met with consequences, a U.S. official said on Tuesday. The move by Washington came after reports that three tankers had been struck in the Strait of Hormuz on Tuesday.
Among the incidents, a Qatari liquefied natural gas carrier was reported by Qatar to have been struck by an Iranian drone. Separately, a Saudi-flagged crude oil tanker, believed to be the supertanker Wedyan, suffered damage off the coast of Oman. The immediate causes of the damage were not clear.
Market participants and analysts pointed to the fragility of the current situation. "This shows just how fragile the ceasefire actually is. Further attacks could sporadically appear in the coming months and this will further add to the volatility," said Ajay Parmar, director of energy and refining at ICIS. "Just one disagreeable message from one side could bring anger to the other, and remember if Iran merely threatens to close the Strait of Hormuz again, prices will spike considerably. As such, we firmly believe that volatility really is here to stay."
UBS analyst Giovanni Staunovo noted that renewed tensions in the Middle East and concerns over the vessel attacks could reduce oil exports from the region, a factor that could weigh on global supply.
Tensions between Tehran and Washington remained at the center of market attention. Iran’s foreign minister said on Tuesday that talks to reach a final deal between Tehran and Washington would not proceed if U.S. threats continued, a comment offered after a U.S. presidential warning that he would "finish the job" unless a deal was completed.
Investors are closely monitoring negotiations between the U.S. and Iran and the potential implications for shipping through the Strait of Hormuz, which prior to the beginning of the Iran war carried a fifth of the world’s daily supply of oil and liquefied natural gas (LNG).
Separately, Kyiv’s military reported that Ukrainian drones struck eight tankers that are part of Russia’s so-called "shadow fleet" of ageing vessels used to bypass sanctions and that were delivering fuel to Crimea overnight. The strikes add another layer of complexity to maritime fuel routes and sanction-evasion concerns.
Sectors affected: energy producers and refiners, shipping and maritime insurance, global commodity markets.