TOKYO – Oil rose for a third day as President Donald Trump threatened further strikes on Iran, hours after the United States resumed its blockade on the Islamic Republic’s shipping through the Strait of Hormuz.
Global benchmark Brent crude rose 1.4 per cent to US$85.90 a barrel as at 11.16am Singapore time, after surging 11 per cent in the previous two sessions, while West Texas Intermediate traded 1.1 per cent higher at US$80.20.
Trump told Fox News that the US will continue to strike Iran and may hit power plants and bridges next week unless Tehran comes to the negotiating table.
The US resumed its blockade at 4pm Washington time on July 14, one hour after American forces launched fresh strikes aimed at degrading Iran’s abilities to hit commercial ships in the strait. Meanwhile, Trump on July 14 backed away from a plan he announced a day earlier to impose a 20 per cent charge on shipments through the waterway.
The reversal was a welcome sign for shippers shaken by the collapse of the US-Iran ceasefire and the prospect of further disruptions in the world’s most important energy chokepoint, through which about a fifth of global crude and liquefied natural gas normally passes. It also illustrated the bind Trump is in, as hostilities with Iran flare and Tehran refuses to loosen its grip on the waterway, putting upward pressure on oil prices.
“While crude has started to find some balance after rallying from around US$70, it still takes a brave shipowner to transit the Strait of Hormuz with the threat of attacks from forces aligned with Tehran remaining very real,” said Chris Weston, head of research at Pepperstone Group. “The broader geopolitical backdrop continues to deteriorate, providing ongoing support for crude prices and keeping buyers prepared to step back in should prices push toward the US$90 area.”
Oil has soared in recent days amid the renewed fighting in the region, including attacks on crude-laden vessels and Gulf nations including Kuwait, that have brought shipping to a near-standstill. Prices have climbed to their highest in about a month, recouping part of a roughly 30 per cent second-quarter decline, as the escalating conflict revives concerns over supplies from the energy-rich region.
Over the past month, Persian Gulf producers had begun marketing additional crude after an interim peace agreement eased export concerns. The United Arab Emirates in particular proved highly successful at moving barrels by utilising shuttle tankers sailing dark, or with their transponders off.
Meanwhile, in a widening of the conflict, the Iran-backed Houthi group in Yemen fired ballistic missiles and drones on Saudi Arabia, the first major escalation between the sides since they agreed to a ceasefire in 2022. The Houthis have become an integral part of Iran’s network of proxy militia across the Middle East.
Along with reports of recent attacks in Kuwait, Bahrain and Jordan, the latest developments underscore the widening regional conflict and it’s hardly an environment that encourages traders to rebuild structural short positions in crude, according to Pepperstone Group’s Weston.
Elsewhere, an industry-backed group said US crude inventories fell 600,000 barrels last week. That would be the 11th decline in 12 weeks if confirmed by official data on July 15. BLOOMBERG
