Global oil prices surged by over three percent on Wednesday after a sharp escalation in military tensions between the United States and Iran, alongside the reinstatement of US sanctions on Iranian crude oil. This development has intensified fears that the fragile truce between the two countries is rapidly deteriorating.
By 0645 GMT, Brent crude futures increased by $2.40, or 3.2%, reaching $76.56 per barrel. Similarly, US West Texas Intermediate (WTI) crude rose by $2.26, also a 3.2% gain, trading at $72.70 per barrel. This sharp rise continued the momentum from Tuesday, when both benchmarks climbed approximately three percent following Washington’s decision to revoke the general license that had previously permitted the sale of Iranian crude.
Commodity strategists at ING highlighted that while this revocation may not immediately alter fundamental market conditions, it significantly affects market sentiment. The move greatly raises the possibility of a complete collapse of the temporary agreement reached between the US and Iran just last month.
In a significant development, the price rally followed direct military confrontations. The US Central Command stated that the US military conducted airstrikes in response to Iranian attacks on three commercial vessels passing through the strategically vital Strait of Hormuz on Tuesday.
In retaliation early Wednesday, Iran’s Revolutionary Guards announced attacks targeting US military bases in Bahrain and Kuwait. Although Tehran has not officially claimed responsibility for the initial assaults on the ships, regional tensions have escalated further. Qatar accused Iran of a drone strike on a Qatari liquefied natural gas (LNG) tanker, which caused a fire in its engine room.
Additionally, maritime security sources reported damage to a Saudi-flagged supertanker, the Wedyan, near Oman under unclear circumstances. These hostilities have refocused attention on the Strait of Hormuz, a crucial maritime chokepoint that previously accounted for nearly 20% of the global energy supply before the broader regional conflict erupted in February.
Iran is currently enforcing stricter control over the strait, instructing commercial vessels to navigate closer to its coastline rather than the traditional routes near Oman. Conversely, the US insists that the waterway remain an open and free international passage.
The sudden escalation has caught energy traders by surprise. After the US-Iran truce was signed last month, oil prices had fallen back to pre-conflict levels. Traders, expecting a surge of Middle Eastern supply flooding the global market, had built record short positions—bets anticipating further price declines.
Experts warn that the ongoing conflict highlights the vulnerability of the Strait of Hormuz. Should maritime traffic remain below 50% of pre-war volumes, prolonged supply constraints are likely to sustain upward pressure on prices, forcing short-sellers to rapidly cover their positions.
Adding to geopolitical concerns are diminishing global oil reserves. Since the conflict began, countries have steadily drawn down emergency inventories to offset supply shortages. Recent data from the American Petroleum Institute showed US crude stocks fell again last week, exceeding official forecasts that predicted a 2.4 million barrel decline for the week ending July 3.
