The new U.S. strikes on missile sites and boats in southern Iran are further clouding the market view of how the nearly three-month-long crisis will unfold.
Oil prices jumped early on Tuesday in Asian trade following the strikes. Prices slumped by 5% on Monday due to hopes of a U.S.-Iran deal.
The fresh strikes, however, are complicating the situation in the Persian Gulf and around the Strait of Hormuz, and giving markets pause in the optimism that a framework agreement between the United States and Iran could be reached.
The U.S. labeled the new strikes on Iran as “self-defense,” and Central Command spokesperson Capt Tim Hawkins said the U.S. military “continues to defend our forces while using restraint during the ongoing ceasefire.”
It’s unclear how the strikes would affect the ceasefire. It is unclear how Iran would respond to these, either.
U.S. President Donald Trump said this weekend that the Strait of Hormuz would reopen, but there has been no sign that traffic is moving freely despite an uptick in vessels carrying energy cargoes making it out of the Persian Gulf en route to buyers.
The noise around a potential deal has continuously trumped market fundamentals in recent weeks, with traders trying to play the market on hopes of an agreement and largely ignoring the global energy crunch, with most supply from the Middle East still trapped behind the Strait of Hormuz.
Oil traders don’t want to think about the worst-case scenario, but the market needs to brace for a spike in oil prices in July because four months of closed Strait of Hormuz is a recipe for a “disaster” and global recession, Fereidun Fesharaki, Chairman Emeritus of energy consultancy FGE NexantECA, told CNBC earlier this week.
“Nobody wants to think about the worst-case scenario. So everybody thinks every news is good news,” Fesharaki told the CNBC Access Middle East program.
By Tsvetana Paraskova for Oilprice.com
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