Oil: Prices Surge Following New US Strikes Against Iran – Brent Moves Above $76
The New Exchange of Strikes Threatens to Undermine the Fragile Ceasefire, While Prices Are Also Bolstered by the US Department of the Treasury's Decision to Withdraw the Waiver That Allowed Iran to Sell Oil.
Oil prices moved upward following new US strikes against Iran, which were launched in retaliation for Tehran's attacks on commercial vessels in the Strait of Hormuz.
West Texas Intermediate crude futures for August delivery rose earlier by 2.87%, to $72.46 a barrel. Brent, the international oil benchmark, for September delivery, recorded an increase of 2.75%, to $76.18 a barrel.
The US military announced it initiated a "series of powerful strikes" against Iran following attacks on three commercial ships transiting the Strait of Hormuz on Tuesday, warning that Tehran will face a "heavy cost" for targeting commercial navigation.
"The strikes are a response to Iranian attacks on three commercial ships transiting the Strait of Hormuz. Iran’s aggression was unjustified, dangerous, and a clear violation of the ceasefire," the US Central Command said in a post on X.
The new exchange of strikes threatens to undermine the fragile ceasefire reached last month, which had allowed the reopening of the Strait of Hormuz to commercial shipping after months of disruption.
An indication of the deteriorating sentiment is also the decision of the US Department of the Treasury to withdraw the waiver that allowed Iran to sell oil.
"Iran will only reap benefits if it demonstrates good behavior," a US official told CNBC on condition of anonymity. "Iran’s actions in the Strait were completely unacceptable to the United States and will have consequences," they added.
According to the US-led Joint Maritime Information Center, three vessels were attacked on Tuesday in or near the Strait of Hormuz. The center upgraded the threat assessment for ships transiting the waterway to "severe," warning that further hostile action from Iran is likely.
"It is not in Iran's interest to reach a deal right now, as its bargaining power against Trump increases as we move closer to November, although yesterday's attacks coincide with the state funeral ceremonies for Ali Khamenei," said Andrew Jackson, a strategist at Ortus Advisors.
The US midterm elections are scheduled for November, and a spike in inflation due to the Middle East conflict could increase the political cost for the Trump administration.
Jackson also noted that the rise in oil and bond yields increases the probability that the Fed might be forced to adopt a more hawkish stance if inflation proves persistent. The yield on the 10-year US Treasury note was moving higher by 2 basis points, at 4.549%.
