Oil prices increased by more than 2% on Wednesday following airstrikes conducted by the United States on Iran and the reinstatement of sanctions on Iranian crude sales. This development has reignited concerns regarding the stability of the ceasefire in the Middle East and the potential for new supply disruptions. Brent crude futures increased by $1.62, representing a rise of 2.16%, reaching $76 per barrel. Meanwhile, U.S. West Texas Intermediate crude saw an uptick of $1.63, or 2.31%, bringing it to $72 per barrel. Both benchmarks had already advanced approximately 3% on Tuesday after the United States withdrew the general licence that had permitted the sale of Iranian crude following the vessel attacks. “U.S. Central Command forces have begun launching a series of powerful strikes against Iran to impose heavy costs for targeting and attacking commercial shipping crewed by innocent civilians in an international waterway,” CENTCOM stated in a post to X.

U.S. Central Command reported that the strikes were initiated as a reaction to Iranian assaults on three commercial vessels navigating the Strait of Hormuz. The waterway serves as a vital conduit for the transportation of crude oil from the Middle East to international markets. Analysts indicated that the recent escalation has served as a reminder to markets regarding the vulnerability of shipping routes through the Strait of Hormuz. The renewed tensions have also challenged the prevailing expectation that global oil markets were heading into oversupply, prompting traders with large short positions to reassess their bets. Iran did not take responsibility for the attacks on the vessels. However, Qatar attributed the incidents to Iran, including an assault on a Qatari liquefied natural gas tanker that was hit by a drone, resulting in a fire in its engine room. A Saudi-flagged crude oil tanker, thought to be the supertanker Wedyan, has reportedly sustained damage off the coast of Oman. However, maritime security sources indicated that the cause remains unclear at this time.

The incidents have once again raised concerns regarding shipping through the Strait of Hormuz, which managed cargoes equivalent to approximately one-fifth of the global energy supply prior to the onset of the war in February. Oil prices have reverted to pre-war levels following the recent truce between the United States and Iran established last month. The decline prompted traders to establish significant short positions in oil futures, anticipating that postponed Middle East supplies would soon re-enter the market. Industry experts indicated that a swift return to normal operations in the strait is improbable. They observed that reinstating normal traffic would necessitate synchronised vessel movements, the resumption of oil well operations, the repair of damaged infrastructure, and consensus on de-mining initiatives. Several shipowners continue to exercise caution regarding the resumption of operations in the Strait of Hormuz and the wider Persian Gulf.

Analysts indicated that global oil inventories experienced a reduction during the extended disruption to shipping through the strait, and that the process of rebuilding these inventories will require time. Inventories are anticipated to stay under pressure until further crude supplies from the Gulf commence their arrival in international markets. Last month, Saudi Aramco Chief Executive Officer Amin Nasser cautioned that any extended interruption in the Strait of Hormuz might postpone the restoration of stability in global oil markets until 2027. He stated that an extended disruption could impact nearly 100 million barrels of oil supply each week. Saudi Aramco stands as the preeminent oil producer globally.