Oil rises nearly 2% as US strikes on Iran revive supply fears

TOKYO: Oil prices rose nearly 2% on Wednesday after the United States launched fresh airstrikes against Iran and reinstated sanctions on Iranian crude sales, raising concerns that a fragile truce between the two countries could break down.

Brent crude futures rose $1.38, or 1.9%, to $75.54 a barrel by 0128 GMT.

US West Texas Intermediate crude increased $1.37, or 1.9%, to $71.81 a barrel.

Both benchmarks had already gained about 3% on Tuesday after Washington revoked a general licence that had authorised the sale of Iranian crude.

The US Central Command said the airstrikes were carried out in response to Iranian attacks on three commercial vessels transiting the Strait of Hormuz.

The waterway is a key route for Middle Eastern oil shipments and carried cargoes equal to about one-fifth of global energy supply before the war began in February.

Iran has not taken responsibility for the attacks on vessels.

Qatar blamed Iran for the incidents, including an attack on a Qatari liquefied natural gas tanker that was reportedly hit by a drone, causing a fire in its engine room.

A Saudi-flagged crude oil tanker, believed to be the supertanker Wedyan, was also damaged off Oman, according to maritime security sources. The cause of the damage was not immediately clear.

The incidents have renewed concerns over tanker traffic through the Strait of Hormuz.

Iran is asserting control over the strait and has ordered ships to use a route closer to its coast instead of a route nearer to Oman, which also borders the waterway.

The United States has maintained that the waterway must remain open to all traffic as it was before the conflict began.

Saul Kavonic, head of research at MST Marquee, said the latest escalation reminded the market that passage through the Strait remained fragile.

He said continued tensions and traffic below 50% of pre-war levels could create supply constraints and support higher oil prices.

After the US and Iran signed a truce last month, oil prices fell back to pre-war levels as traders built large short positions in oil futures, reflecting expectations that prices would fall further.

The decline was driven by expectations that pent-up Middle East supply would return to the market.

However, the latest strikes and shipping attacks have challenged that view and raised the risk of renewed supply disruption.

Since the war began, countries have drawn down inventories to offset supply shortfalls.

US crude inventories fell again last week, market sources said on Tuesday, citing data from the American Petroleum Institute.

Analysts polled by Reuters had expected crude stockpiles to fall by about 2.4 million barrels in the week ended July 3.