Tehran, Iran – Oil prices surged on Tuesday, driven by renewed security tensions in the Strait of Hormuz, the strategic waterway through which roughly a fifth of the world’s oil supply flows. The price jump also followed reports of attacks on commercial tankers, reviving concerns about energy security in the Gulf region.
The repercussions of the attack on the markets
According to Bloomberg, Brent crude, the international benchmark, climbed to nearly $73 a barrel, while West Texas Intermediate (WTI) approached $69. These developments followed an announcement by the UK Maritime Trade Operations (UKMTO) that the natural gas tanker Al-Rakayat had been attacked off the coast of Oman. The attack caused a fire on board. Meanwhile, Axios quoted a US official confirming that the Iranian Revolutionary Guard Corps (IRGC) had targeted two commercial vessels with missiles. This has further complicated the already uncertain maritime traffic situation, despite efforts to partially reopen the Strait of Hormuz.
Between geopolitical tension and oversupply
Despite the immediate price surge, experts believe this recovery may be temporary. Warren Patterson, head of commodities at ING, pointed out that market weakness and prevailing bearish sentiment could limit further gains for oil, especially after prices fell by 30% in the second quarter of the year following the interim peace agreement between Washington and Tehran.
In a striking move reflecting market pressures, Saudi Aramco announced an $11-per-barrel price cut for its Arab Light crude oil destined for Asia, a level not seen since the price wars of 2015 and 2020.
Moreover, this move aligns with OPEC+’s decision to increase production quotas. This reinforces concerns about a global supply glut that could further depress prices.
A look at current prices
By midday Singapore time, crude oil gains had stabilized, with Brent crude for September delivery rising 0.7% to $72.50 and West Texas Intermediate (WTI) crude for August delivery climbing 0.6% to $68.97. However, markets today find themselves caught between the hammer of geopolitical tensions in international shipping lanes and the anvil of economic forecasts. Major banks such as Goldman Sachs and Morgan Stanley are also warning of a potential return to a glut in oil supply. Therefore, the future trajectory of prices hinges on the sustainability of the security escalation and the extent to which producers adhere to their new production quotas.
