Oil Rises as Supply Threats Escalate Amid Ongoing War with Iran

SadaNews - Oil prices rose following their first decline in nearly a week, as Iran escalated its attacks on energy infrastructure in the Arabian Gulf region.

Brent crude prices increased towards $105 per barrel after losing 2.8% on Monday, while West Texas Intermediate crude was trading near $98.

The UAE announced a temporary halt to operations at the Shah natural gas field, while Iran targeted the Majnoon oil field in Iraq with drones and missiles.

The Iranian strikes have further deteriorated expectations for global energy supplies as the war enters its third week, with near-complete cessation of shipping traffic through the Strait of Hormuz affecting consumers, especially in Asia.

Oil prices have risen over 40% since the start of the war, but they fell for the first time in four sessions on Monday, as the United States prepared to release the first tranche of its emergency crude oil reserves in an effort to calm soaring prices.

The threat from U.S. President Donald Trump to expand strikes on Qeshm Island to include oil infrastructure has fueled tensions, especially after excluding energy assets in the Iranian export hub from the strike he launched over the weekend.

He also stated that Washington is "destroying" Iran's capabilities to threaten commercial shipping through the Strait of Hormuz, a vital passage that has been effectively closed since the outbreak of the war at the end of last month, despite his call for the world to help protect the strait, a call that was met with indifference.

In a related context, CNBC reported, citing U.S. Treasury Secretary Scott Piesen, that the U.S. is allowing Iran to continue shipping crude oil through this passage, while indications that some vessels have managed to cross the strait contributed to the price decline on Monday.

Supply expectations have also improved as the U.S. Department of Energy is set to release the first batch of emergency oil reserves, and the International Energy Agency signaled the possibility of withdrawing from stocks additionally.

Complex Market and Ongoing Tensions

Rebecca Babin, senior energy trader at CIBC Private Wealth Group, stated: "This is not a market driven by a single story."

She added in an interview on Bloomberg TV: "This is a market with about 100 stories happening simultaneously, trying to determine how much supply is leaving the market and how long it will be gone."

In the Middle East, Abu Dhabi and Kuwait reduced oil production, while Saudi Arabia and the UAE, which had to close their airspace on Tuesday, are attempting to accelerate exports through alternative routes that bypass the Strait of Hormuz.

Analysts at JPMorgan Chase, including Natasha Kaniva, wrote in a note that passing through the strait is likely to become "increasingly conditional," as Iran may allow some ships to pass depending on their political affiliation.

The repercussions of the most volatile week ever for the global benchmark Brent continue to reverberate in the markets. Daily trading ranges were much wider than usual, as disruptions in the Middle East caused what the Energy Agency described as the largest supply disruption in the history of the global oil market.

Bloomberg quoted Chris Weston, head of research at Pepperstone Group in Melbourne, as saying that "the biggest risk in the market is sustained restrictions on the Strait of Hormuz for a longer period, with the market feeling that the U.S. and its allies have limited ability to change this reality."

Meanwhile, Axios reported, citing undisclosed sources, that a direct communication channel between the United States and Iran has recently been reactivated.