Oil jumped after the US and Iran escalated hostilities over the weekend, including an attack on a vital oil facility in Kuwait and the targeting of ships attempting to transit through the Strait of Hormuz.
Brent rose above US$90 a barrel after surging almost 16 per cent last week, while West Texas Intermediate traded near US$85. Tehran said the ceasefire between the US and Iran has been effectively abandoned, raising the possibility of deepening disruptions to crucial energy flows through the narrow waterway.
A week of back-and-forth attacks by both sides has expanded beyond strictly military targets to include bridges, utilities and port facilities, signaling little prospect of a return to the fragile truce. Kuwait Petroleum said Iran struck an oil facility on July 18, causing significant material damage.
Kuwait bore the brunt of Iran’s retaliation, while Bahrain was targeted and Israel said on July 19 it intercepted an Iranian done near the Israel-Syria border. US forces hit Qeshm Island in the Persian Gulf, as well as southern cities including Shadegan, Sirik and Hajiabad, Iranian media reported.
The Iranian Navy said on July 19 it had halted four unidentified ships attempting to use an “unsafe route” in the Strait of Hormuz after disregarding warnings. Two “met with accidents and were stopped in their tracks, while the others “abandoned the route and turned back,” the navy said.
The US has resumed blockading Hormuz while Iran’s attacks on ships around the waterway have jeopardised the “shuttle run” trade through which Persian Gulf producers ferried out cargoes. On July 18, Iranian Supreme Leader Mojtaba Khamenei has warned of “unforgettable lessons” for the US. BLOOMBERG
