Oil prices climbed once again in early Asian trade on Wednesday as the U.S. and Iran traded strikes in a significant escalation after a month of relative calm.
At the time of writing, WTI had climbed to $91.05 per barrel, trading 0.92% higher on the session, and Brent had risen 1.19% to trade at $95.68. Both benchmarks have now climbed by roughly $5 since hostilities between the two countries renewed.
U.S. Central Command (Centcom) reported that it had completed a wave of strikes against “air defense sites, radar systems, maritime assets and facilities, mine laying capabilities, and communications sites.” The strikes were in retaliation for the IRGC targeting commercial shipping in the Strait of Hormuz and U.S. service members in the region.
Axios later reported that the U.S. had struck two Iranian tankers as part of a new ‘tanker for tanker’ policy in the Strait. This was the first time the U.S. had attacked Iranian tankers in retaliation rather than as part of its ongoing blockade.
The IRGC claimed to have attacked Camp Titin, a US Marine facility on the Gulf of Aqaba, in response to U.S. aggression. Jordan’s armed forces confirmed that its air defence systems had “dealt with” 13 ballistic missiles fired from Iranian territory, with 10 of them being destroyed and three falling in remote areas.
The IRGC also claimed to have attacked U.S. targets in Bahrain and Kuwait, with Kuwait confirming that its air defences were “actively engaging with missile and drone threats” from Iran and Bahrain saying it had successfully intercepted Iranian drones. The IRGC also said, via the IRNA News Agency, that it had shot down an MQ-9 drone belonging to the U.S. military. That claim remains unconfirmed.
In response to an ABC News report that the latest round of economic and military pressure from the U.S. was an attempt to force Iran back to the negotiation table, President Trump posted on social media that he “couldn’t care less” if Iran signs an agreement. He went on to ask, “when are the Iranian people going to rise up and fight?”
Adding to the upward pressure on oil prices, the American Petroleum Institute reported a 2.6 million barrel draw in U.S. oil inventories, while another 3.1 million barrels were drawn from the Strategic Petroleum Reserve to aid commercial inventories. Traders will be closely watching Wednesday’s release of the EIA inventory data for confirmation of those numbers.
This latest escalation may well mark a turning point in the conflict after a month of relative calm. For Iran, as economic pressure mounts, there appears to be few options left beyond further military retaliation. The Iranian rial fell to a record low in August, breaking the psychologically important 2 million rial per dollar mark, and it remains to be seen just how much economic pain the regime can tolerate. For oil markets, another period of significant volatility seems likely as disrupting crude flows remains Iran’s most influential weapon.
By Josh Owens for Oilprice.com
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