Crude oil futures traded sharply higher on Wednesday morning after the US military conducted fresh attacks on Iran and revoked a waiver that had allowed Iran to sell crude oil in global markets, according to a report by BL Mangaluru Bureau.
Price Movements
At 10.03 am on Wednesday, benchmark contracts posted solid gains across exchanges:
| Contract | Exchange | Price | Change |
|---|---|---|---|
| September Brent | ICE | $76.06/barrel | +2.56% |
| August WTI | NYMEX | $72.21/barrel | +2.51% |
| July crude | MCX | ₹6,884/barrel | +2.67% |
| August crude | MCX | ₹6,890/barrel | +2.47% |
The July crude futures on the Multi Commodity Exchange (MCX) opened at ₹6,884 against the previous close of ₹6,705, while the August contract traded at ₹6,890, up from ₹6,724.
Supply Disruptions and Military Action
The price surge followed a series of escalating military events. A statement from the US Central Command said that its forces completed a new round of offensive strikes against Iran on July 7, hitting over 80 targets with precision munitions. The strikes were an immediate response to Iran's latest attacks on commercial vessels transiting the Strait of Hormuz.
US forces struck Iranian air defence systems, command and control networks, coastal radar sites, and anti-ship missile capabilities. Additionally, more than 60 Islamic Revolutionary Guard Corps small boats were targeted in and near the strait to degrade Iran's ability to continue attacking international commerce flowing through the trade corridor.
According to the US Central Command, Iran recently attacked three commercial vessels transiting the strait:
- MT Al Rekayyat (Marshall Islands-flagged)
- MT Wedyan (Saudi Arabia-flagged)
- MT Cyprus Prosperity (Liberian-flagged)
The unwarranted aggression by Iranian forces was described as "a clear and dangerous violation of the ceasefire" that undermines freedom of navigation.
Market Sentiment and Waiver Revocation
In their Commodities Feed for Wednesday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, noted that oil prices spiked following Iranian attacks on three ships in the Strait of Hormuz, including an LNG carrier and an oil tanker. ICE Brent settled a little more than 3% higher on Tuesday, and in early Wednesday trading it was up another 2.8%, leaving it trading above $76 a barrel.
The Iranian attacks saw the US respond in a firm manner with renewed strikes. There were reports of explosions near the strait. In addition to military strikes, the US revoked a temporary licence that it had previously issued to allow for the sale of Iranian oil. According to Patterson and Manthey, while the revocation does not fundamentally change oil market dynamics, it is important from a sentiment perspective. It heightens the risk of a breakdown in the temporary deal between the US and Iran.
The combination of military action and the removal of the oil waiver reinforces the geopolitical risk premium in crude markets, keeping traders focused on supply security from the Middle East. The Strait of Hormuz, a critical chokepoint for global oil shipments, remains a flashpoint that could trigger further volatility in the coming sessions.
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