Oil prices edged higher in early Asian trade on Monday following another weekend of escalation in the U.S.-Iran war.
At the time of writing, WTI was trading at $92.14 per barrel, up 0.72% on the session, while Brent had risen 0.63% to trade at $96.89.
On Saturday, U.S. Central Command (Centcom) reported that it had struck three Iranian oil tankers in response to the IRGC targeting two U.S. warships with ballistic missiles. The three tankers hit were M/T Downy, M/T Stark 1, and M/T Kylo, and were struck near Kharg Island, Jask, and in the Gulf of Oman, respectively. Following the attack, Admiral Brad Cooper said the message was clear: “If you shoot at two of our ships, we will impose an even higher economic cost —taking out three of yours.”
On Sunday, Centcom also updated the figures of its naval blockade against Iran, with U.S. forces now having redirected 92 commercial vessels, disabled 3, and boarded 2 since the blockade resumed on July 14.
Following the attacks, Iranian parliament speaker Mohammad Bagher Qalibaf said that the era of “proportionate responses” is now over, and warned that future retaliations from Iran will be “faster, heavier and more painful.” Meanwhile, Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, suggested that Iran would soon announce a new restricted zone outside the Strait.
It remains unclear exactly how much oil is making it through the Strait of Hormuz at the moment. U.S. Energy Secretary Chris Wright claimed over the weekend that more than 9 million barrels per day of oil are being exported via water routes, with pipelines taking another four or five million. Iran’s military has continued to describe the Strait as completely closed to vessel traffic, with the stated aim of ensuring not a drop of oil leaves the region. Independent tanker tracking suggests the reality lies somewhere in between those claims, with TankerTrackers.com estimating that flows averaged about 5.04 million bpd over the latest 28-day period. Even that estimate carries considerable uncertainty as a growing number of vessels have been turning off AIS transponders.
Regardless of how much oil is currently getting through, the most recent economic campaign against Iran does appear to be having an effect, with reports of economic pain in the country rising significantly. Whether that will bring Iran back to the negotiating table or result in a more erratic and intense conflict remains to be seen.
By Josh Owens for Oilprice.com