London — Oil prices rose nearly 2% on Tuesday, recovering some of the previous session’s losses as renewed Iranian attacks on the United Arab Emirates heightened concerns about the worsening outlook for global supply if there is no quick resolution to U.S.-Israeli war on Iran, now in its third week.
Brent crude futures gained $1.74, or 1.7%, to $101.95 a barrel by 1435 GMT while U.S. West Texas Intermediate (WTI) crude advanced $1.41, or 1.5%, to $94.91.
The U.S.-Israeli war on Iran shows no signs of abating. While oil futures have not repeated the brief surge to nearly $120 a barrel from earlier in the month, the series of attacks on oil installations by Iran and the ongoing disruption to shipping through the Strait of Hormuz – a vital gateway for about 20% of the world’s oil and liquefied natural gas trade – has traders girding for long-term impairment to supply that could keep prices elevated for an extended period.
“The risks remain stark: It only takes one Iranian militia to fire a missile or plant a mine on a passing tanker to reignite the entire situation,” IG market analyst Tony Sycamore said in a note.
Iran renewed attacks on the United Arab Emirates on Tuesday, causing oil loading at the port of Fujairah to be at least partly halted after the third attack in four days ignited a fire at the export terminal. Fujairah, located on the Gulf of Oman just outside the Strait of Hormuz, is a critical exit point for oil volumes equivalent to roughly 1% of global demand.
The effective closure of the strait has forced UAE, the Organization of the Petroleum Exporting Countries’ third-largest producer, to reduce its output by more than half, two sources told Reuters.
Middle East crude benchmarks have scared to record highs, becoming the world’s most expensive oil, with traders blaming the price spike on reduced supply available for delivery.
SEVERE DISRUPTIONS
Several U.S. allies rebuffed Donald Trump’s call on Monday to send warships to escort shipping through the strait, drawing criticism from the U.S. president, who accused Western partners of ingratitude after decades of support. Germany’s defence minister responded by saying that “this is not our war, we have not started it.”
Oil tankers are “starting to dribble through” the Strait of Hormuz, White House economic adviser Kevin Hassett told CNBC on Tuesday, reiterating the Trump administration’s position that they see the Iran conflict lasting weeks, not months. On Monday, Brent lost 2.8% while U.S. WTI fell by 5.3% after some vessels sailed through the critical Strait of Hormuz.
“While that has eased concerns about an immediate hit from locked-up Middle Eastern barrels, traders still expect the disruption to be severe,” investment bank Cavendish said in a note.
Among the vessels that have transited the strait are those operated by Iran, however.
Oil prices still have the potential to be higher by the end of March, with technical analysis showing WTI’s medium-term resistance at $124 a barrel, said OANDA analyst Kelvin Wong.
To curb rising energy costs, the head of the International Energy Agency suggested member countries could release more oil, in addition to the 400 million barrels they have already agreed to draw from strategic reserves.
Reporting by Stephanie Kelly in London and Anushree Mukherjee in Bengaluru Editing by David Goodman and David Gaffen – Reuters
