Oil up as traders digest escalation in US-Iran strikes
Oil prices jumped today on the escalation of hostilities between the US and Iran, but later pared gains as traders assessed the actual impact on supply disruptions.
Tehran declared the Strait of Hormuz closed after the US launched additional strikes against Iran and as President Donald Trump vowed even more attacks if no peace deal is secured.
Brent futures inched eight cents (0.09%) higher to stand at $93.18 a barrel this morning while US West Texas Intermediate (WTI) crude climbed 25 cents, or 0.28%, to $90.28.
Both futures had gained more than $2 earlier in the session.
Iran's joint military command announced the closure of the Strait including oil tankers and commercial ships, saying any vessel attempting passage will be shot at.
"It once again suggests a deal is still some way off and that energy flows from the Persian Gulf will remain heavily constrained," said ING analysts in a note to clients, noting the renewed escalation in fighting prompted oil prices to rally in early morning trading.
"However, the rally was not fully sustained as the market has not yet seen an actual disruption in oil shipments through the area," said Linh Tran, market analyst at XS.com.
The US military said on X yesterday that commercial ships continued to transit in and out of the Strait. It also said no US warships have been struck in the Strait, after Iran's state media reported US ships near the waterway were targeted by missiles and drones.
US forces began launching additional strikes against multiple targets in Iran yesterday, the latest in an escalating exchange of attacks that threaten to reignite a full-scale war, which was paused in early April when the two sides agreed to a fragile ceasefire.
Trump told Fox News reporter Trey Yingst that the strikes would stop shortly but that he would "bomb the shit out of them" if Iran's leaders did not sign an agreement with the US immediately.
Despite the conflict, Indian refiners told Reuters today they have secured enough crude to meet their needs through until August.
Abu Dhabi National Oil Co (ADNOC) and some other sellers managed to export some crude and offered some to buyers in Asia.
Meanwhile, US crude inventories fell by 7.2 million barrels to 426.5 million in the week ended June 5, the EIA said yesterday, compared with analysts' expectations in a Reuters poll for a 4 million-barrel draw.
US crude inventories, including those from strategic reserves, have fallen by 79 million barrels since the Iran war began on February 28, as the top global producer moved to plug supply gaps after the strait was effectively shut.
Underscoring the squeeze, OPEC output in May slid to its lowest level in over two decades, a Reuters survey showed, as a US naval blockade curbed Iran's exports and Tehran's effective closure of the strategic waterway slashed shipments from other Gulf producers.
