Wednesday’s jump in oil prices to a two-week high suggests that market participants were too complacent about the U.S.-Iran ‘deal to make a deal’ and that the ceasefire would hold and oil flows through the Strait of Hormuz would only increase, analysts at ING said on Thursday.
Oil prices surged by over 5% on Wednesday, gaining 7% at one point to a two-week high, after the escalation in the region.
The Iranian attacks on three commercial ships on Tuesday, including an oil tanker and an LNG carrier, have prompted some shipowners and operators to pause attempts to transit the Strait of Hormuz as the security situation has sharply deteriorated.
After Iran hit three ships in the Strait of Hormuz, the United States on Tuesday night attacked multiple targets in Iran, including “air defence systems, command and control networks, coastal radar sites, anti-ship missile capabilities.”
Iran retaliated with strikes on U.S. military bases in Bahrain and Kuwait in a stark reminder that the ceasefire agreed by the warring parties last month is anything but stable.
Later on Wednesday, U.S. President Donald Trump said the ceasefire was “over” and the memorandum of understanding from mid-June was a “waste of time.”
The Trump administration also revoked a temporary sanctions waiver that allowed Iran to sell oil and petrochemicals.
The market reacted to the latest flare-up with a surge in prices as hopes began to fade that the flows through the Strait of Hormuz would constantly increase and flood the world with oil.
“The past few days’ price action makes one thing clear: markets were far too relaxed about the risks surrounding the deal — and far too bullish on how quickly regional supply could rebound,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note early on Thursday.
Tanker traffic at Hormuz collapsed on Wednesday and early Thursday as vessel operators exercised extreme caution amid renewed hostilities.
By Tsvetana Paraskova for Oilprice.com
Source: Original Article
