Oil prices hold near six-week highs as US-Iran attacks disrupt shipping

Oil prices remained near six-week highs on Monday as attacks involving the United States and Iran affected vessels in and around the Strait of Hormuz, keeping Middle Eastern crude flows low and pushing Brent closer to $100 a barrel.

Brent crude futures rose $1.19, or 1.2%, to $97.47 a barrel by 1214 GMT, after reaching $97.93, their highest level since July 24. U.S. West Texas Intermediate rose 78 cents to $92.26. Brent had gained about 8% the previous week, while WTI rose nearly 10% after the United States and Iran resumed attacks.

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Major escalation

The Financial Times reported that Saudi Aramco’s Jazan oil refinery was attacked on Monday, citing two people familiar with the matter. The extent of the damage was being assessed. U.S. Central Command said U.S. forces struck three Iranian oil tankers on Saturday, including one off Kharg Island, a major oil export hub.

Iran’s Islamic Revolutionary Guard Corps said it had targeted three tankers using unauthorized routes through the Strait of Hormuz, along with three U.S.-linked vessels elsewhere. Maritime intelligence firm Marisks called the attacks a “major escalation,” saying commercial tankers were being deliberately used as instruments of reciprocal economic pressure.

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Commercial tankers are now being deliberately used as instruments of reciprocal economic pressure, substantially weakening the previous distinction between military confrontation and commercial shipping.

A Saudi-owned tanker was attacked by Iran a week earlier, and Saudi Arabia said two seafarers died. Oman said it evacuated 16 crew members on Monday. Kpler data showed that an average of 10 commodity ships crossed the Strait of Hormuz each day during the previous 10 days, the lowest level since May.

“If tanker traffic begins to slow materially, the market could price in a much larger supply shock. And there are already signs that this is happening,” said Priyanka Sachdeva, head of market insights at Phillip Nova. Goldman Sachs said oil could rise to as much as $120 a barrel if attacks on shipping increase. Iran’s Supreme National Security Council secretary Mohsen Rezaei said a restricted zone would be announced outside the strait in the coming days. OPEC+ left its October oil output policy unchanged on Sunday.

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If tanker traffic begins to slow materially, the market could price in a much larger supply shock. And there are already signs that this is happening.