Oil Jumps as Tanker Seizure Escalates Tensions With Iran

STENA_IMPERO
Photo of the Stena Impero by Erwin Willemse, Marine Traffic

By Harkiran Dhillon (Bloomberg) Oil climbed after Iran’s Revolutionary Guard Corp said it seized a British-flagged tanker in the Strait of Hormuz, raising stakes in the critical oil chokepoint.

London-traded Brent futures climbed almost 1% while the U.S. benchmark also rose. The seizure of the tanker is the second Iranian move against a U.K. ship in just over a week. Tensions were already simmering Friday after Tehran refuted President Donald Trump’s claim that the U.S. had downed an Iranian drone near the strait.

Still, New York futures ended the week 7.6% lower, the biggest weekly loss in nearly two months, amid fears about waning demand. The U.S.-China trade war has also weighed on prices, as have expanding American fuel stockpiles.

“The biggest factor driving oil prices today is the Iran-U.S. tension story,” said Phil Flynn, senior market analyst at Price Futures Group Inc. “The rallies appear to show the conflict in Strait of Hormuz might be more serious and that stakes are raised going into this weekend.”

West Texas Intermediate for August delivery rose 33 cents to settle at $55.63 a barrel on the New York Mercantile Exchange.

Brent for September settlement rose 54 cents to $62.47 on the ICE Futures Europe Exchange. It closed down 6.4% for the week. The global benchmark crude traded at a premium of $6.71 to WTI for the same month.

The British government said it was urgently seeking further information about the seized tanker, the latest apparent offensive from the Islamic Republic. On July 11, the British navy intervened to stop Iran from blocking a commercial oil tanker leaving the Persian Gulf. That followed an incident in early July when U.K. forces seized a tanker off Gibraltar that was suspected of carrying Iranian oil to Syria. Iran denied the vessel was heading to Syria and has since vowed to retaliate.

“This is the second time in just over a week the U.K. has been the target of escalatory violence by the Iranian regime,” Garrett Marquis, spokesman for National Security Council at the White House, said in an email. “The U.S. will continue to work with our allies and partners to defend our security and interests against Iran’s malign behavior.”

Other oil-market news:
  • Gasoline rose 0.3% to $1.8405 a gallon
  • Oil explorers in the U.S. idled rigs for a third straight week as crude headed for its steepest weekly decline since late May.
  • Surging oil and gas prices, skyrocketing insurance costs and attacks on energy and banking infrastructure are likely to be some of the initial impacts if the current Iranian tension erupts into outright war.
 

–With assistance from Sharon Cho, Alex Longley, Kasia Klimasinska and Alex Nussbaum.