Oil went up after renewed hostilities between the USA and Iran
Oil prices rose on Monday, August 31, after a new escalation between the USA and Iran and a report of a tanker hitting mines in the Strait of Hormuz. Brent is trading above $90 per barrel, and American WTI above $85.
According to Trading Economics, in the morning Brent rose by about 2.6% to $90.4 per barrel. WTI added about 2.4% and traded around $85.4 per barrel. During the session, November Brent futures approached $91, Bloomberg reports.
The main factor for the market was the sharp increase in geopolitical risks around the Strait of Hormuz - one of the key routes for global oil exports.
The USA and Iran exchanged strikes again
Washington and Tehran exchanged strikes for the first time in about a month. The US Central Command attacked two Iranian missile complexes on Larak Island in the Strait of Hormuz.
The American side said the installations were preparing to launch missiles intended for laying sea mines in the strait. In response, the Islamic Revolutionary Guard Corps reported strikes on American military bases in Jordan.
The Financial Times notes that the new escalation marks the first direct exchange of strikes between the sides in more than a month. This heightened investor concerns about shipping safety and energy supplies through the region.
Tanker hit mines
Additional pressure on the market came from reports of an incident with a tanker in the southern part of the Strait of Hormuz. According to a statement by the Iranian Islamic Revolutionary Guard Corps, the ship hit two sea mines, then caught fire and stopped.
The Iranian side did not name the vessel and did not report data about its crew. Therefore, the independently confirmed scale of the incident is currently unknown.
For the oil market, any expansion of the mine threat in the Strait of Hormuz is particularly sensitive, as it can directly affect the physical transportation of oil from Persian Gulf countries.
Brent ends another volatile month
August became another month of sharp swings in oil prices. According to Bloomberg, during the month the price range for Brent reached almost $17 per barrel.
The market reacted both to attempts by Washington and Tehran to negotiate de-escalation and shipping through the Strait of Hormuz, and to new military incidents. Any signs of negotiation progress reduced the geopolitical risk premium, while new attacks quickly returned it to prices.
An additional factor was increased US economic pressure on Iran. US Treasury Secretary Scott Bessent stated an intention to accelerate the introduction of secondary sanctions to limit Tehran's access to the international financial system and cut its revenues.
Thus, the near-term dynamics of oil prices will largely depend on whether the current exchange of strikes develops into a longer military escalation and whether new incidents affect tanker traffic through the Strait of Hormuz.
Based on materials from: Bloomberg, Financial Times, Trading Economics
