Oil prices continued climbing on Tuesday as the resumption of US-Iran military strikes increased tensions in West Asia and escalated threats to oil shipments passing the Strait of Hormuz.
The price hikes coincided with the Donald Trump-led White House publicly releasing details of the “historic” US-Venezuela oil deal. As part of the agreement, the United States secured majority control over 65 billion barrels of proven Venezuelan oil reserves, around 20% of the over 300 billion barrels the South American country is believed to have.
Trump hailed it as the “biggest oil deal in world history,” and promised that it would “substantially lower gas prices for all Americans, long in the future.” However, experts said otherwise, stressing that the Venezuelan exports will be unable to offer any near-future relief to Americans.
Where do oil prices stand now?
Both oil and gas prices have assumed an unstable stature since the US and Israel attacked Iran on February 28. The joint military action has since badly dampened traffic passing through the Strait of Hormuz, which accounts for about 20% of the world’s oil shipments.
Just hours ago, a Reuters report indicated that oil prices, which were already up 2% on Tuesday, climbed 2% more the same day after the latest instances of the US and Iran trading attacks. Amid renewed fears of suppy disruptions, Brent futures rose $3.44, or 3.8%, to $93.93 a barrel at 1:10 p.m. EDT (1710 GMT), while U.S. West Texas Intermediate crude rose $3.72, or 4.3%, to $89.48.
As a result, Brent was on track for its highest close since August 20 and WTI for its highest close since July 23, according to Reuters.
At the time of writing (11:12 pm IST), Brent oil had soared to $94.484, as seen on the Trading Economics website.
Shipping data from Kpler showed that the number of visible commodity vessels passing through the Strait of Hormuz on Monday held at five per day, below the 10-day average of around 14. None of these ships were liquid tankers.
Earlier last month, Brent fell below $80 at one point. However, the international benchmark is expected to only remain above that level for the year’s remainder amid continuing shipping disruptions, according to analysts polled by Reuters in August.
Meanwhile, the national average for gas continues to remain above $4 a gallon, according to the AAA.
What prompted the oil price spike?
As the US-Iran conflict now stretches into its seventh month, both sides traded strikes for the first time in over a month, with neither appearing to enter into a full-blown war.
The US Central Command confirmed previous reports on Tuesday that the US “forces began striking Islamic Revolutionary Guard Corps (IRGC) targets in Iran. The strikes follow recent attempted attacks by the IRGC against commercial shipping in the Strait of Hormuz and against American service members deployed to the region.”
Trump also warned on Truth Social that the US was “as we speak, striking Iranian targets near the Strait of Hormuz.” Calling the new strikes “large and powerful and in retaliation for the Iranians’ failed attempt at adding sea mines to the Strait,” the POTUS asserted that the United States will hit Tehran at a “much harder and higher level.”
Days before that, US forces attacked two Iranian rocket launchers on Larak Island, a small island in the Hormuz Strait, on Sunday, claiming that Tehran had plans to launch rockets with sea mines into the critical waterway.
Consequently, Iran retaliated by attacking two American bases in Jordan on Monday.
On Monday, Trump threatened further attacks against Iran, telling Fox News that the US would “hit them hard,” in response to attacks on American military bases in the Gulf.
Speaking from the Oval Office the same day, Trump also emphasised that even though Iran’s financial systems and armed forces have mostly degraded, “it doesn’t mean we won’t smack them to see what happens,” Al Jazeera reported.
Additionally, the UK Maritime Trade Operations (UKMTO) agency posted on Tuesday that a tanker was hit by three unknown projectiles while crossing the Hormuz Strait on Monday. The vessel sailing close to the Omani coast didn’t report any casualties.
In the meantime, Washington has also doubled down on exerting “economic pressure” on Tehran and countries offering the West Asian country a lifeline in any way possible by targeting them with punitive sanctions.
Iran, on the other hand, has pushed back against claims that US sanctions have triggered its economy’s collapse. Central Bank Governor Abdolnaser Hemmati asserted that Tehran has sufficient foreign currency reserves and the bank is ready to inject up to $2 billion into the foreign exchange market to help stabilise conditions.
Iranian President Masoud Pezeshkian also told the Shanghai Cooperation Organisation Summit on Tuesday that his nation would immediately reciprocate if the US agreed to fulfill its commitments, as laid out in the interim peace deal signed in June, which intends to end the war and reopen the Strait of Hormuz, according to the Iranian Student News Agency. At the same time, he also maintained that while Iran is not seeking a war, it will “deliver a decisive response to the aggressors.”