Oil Prices Rise After Strait of Hormuz Attacks Raise Supply Concerns

Oil prices rose on Wednesday after two vessels were struck in the Strait of Hormuz and Iranian officials said Tehran had begun using new tactics to target shipping, raising concerns about disruptions to global energy supplies.

Brent crude futures gained 34 cents, or 0.3 per cent, to $106.03 a barrel by 9:30 a.m. Saudi time. US West Texas Intermediate crude futures rose 28 cents, or 0.3 per cent, to $94.42 a barrel. Both benchmarks had climbed by more than $1 earlier in the session.

Iranian officials told Reuters that the country had begun using different offensive tactics against vessels it considered to be violating its restrictions around 10 days ago. One official said the change had resulted in an increase in attacks, but the officials declined to disclose details of the strategy.

The United Kingdom Maritime Trade Operations agency reported on Tuesday that a container ship and an oil tanker had been struck by unidentified projectiles inside the Strait of Hormuz, a key shipping route for global oil supplies.

The developments came as Tehran seeks to maintain pressure on energy markets amid its conflict with the United States and efforts to influence the upcoming US midterm elections.

“The fact that Iranian officials are openly admitting to undermining US efforts to keep oil prices under control speaks volumes about the real intentions behind the so-called ‘peace talks,’” said Priyanka Sachdeva, head of market insights at Phillip Nova.

Security concerns also spread to Saudi Arabia after the Iran-aligned Houthi group attacked an administrative building belonging to state-owned oil company Saudi Aramco in Dhahran. The Saudi energy ministry said the strike caused a limited fire.

The Houthis have launched ballistic missiles and drones towards Saudi Arabia over the past week in retaliation for the kingdom’s support of Yemeni government forces. Riyadh’s international airport has reportedly been hit four times, with a strike on Saturday killing 13 people.

“Supply concern stemming from conflict between the Houthis and Saudi Arabia is driving prices higher,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, a unit of Nissan Securities.

He added that expectations of increased Russian diesel exports could ease market tightness and limit major price movements. Kikukawa forecast that WTI would trade between $90 and $100 a barrel.

Meanwhile, Saudi Arabia increased oil production last month despite shipping disruptions caused by the US-Iran war. The move contributed to a sharp rise in output from OPEC+, the group comprising the Organization of the Petroleum Exporting Countries and partner producers, including Russia, according to OPEC on Tuesday.

Russia also said it saw no direct connection between peace negotiations with Ukraine and its agreement to export diesel to the United States. The statement followed reports that US envoys had presented the deal to Ukrainian officials as part of efforts to bring Moscow back to negotiations.

With attacks on shipping and energy infrastructure continuing to unsettle markets, traders are watching developments in the Gulf closely for signs of further supply disruptions.