OIL prices extended their rally today as fresh US military strikes on Iran thrust the Middle East crisis back into the spotlight, reigniting fears over the stability of the crucial Strait of Hormuz.
The sudden escalation comes after an attack on three vessels near the strategic waterway, prompting US Central Command to launch what it described as “powerful” strikes on Iranian targets.
“The strikes impose heavy costs for targeting and attacking commercial shipping,” a Central Command statement said.
The attacks on the ships occurred close to Oman, which had proposed a temporary transit corridor hugging its coastline—an initiative reportedly opposed by Tehran, which seeks to impose fees on vessels using the strait.
Iran’s foreign ministry has accused Washington of repeatedly violating a memorandum of understanding agreed between the two sides and threatened to “take decisive measures to protect its interests and national security”.
The military action came shortly after the US revoked a temporary sanctions waiver for Iranian oil, further tightening the screws on Tehran’s economy.
Both main crude contracts jumped more than two per cent today, having climbed a similar amount on Tuesday, reaching their highest levels in two weeks. West Texas Intermediate rose 2.3 per cent to $72.03 a barrel, while Brent North Sea Crude gained 2.2 per cent to $75.76.
Andreas Krieg, a security expert at King’s College London, said Iran remained determined to press its demand for charging fees to use the strait—a position Washington has rejected.
“We are now in a sensitive period where potential alternatives to an Iranian toll or fee system are being explored,” he told AFP. “Iran is sending a clear signal that no alternative will be accepted.”
Markets Feel the Pinch
The geopolitical jitters compounded existing concerns over a tech sector sell-off, as investors questioned stretched valuations and the timeline for profits from massive AI investments.
Seoul’s Kospi index, which had been Asia’s poster child for the recent rally, sank more than one per cent and has now lost over 20 per cent since hitting a record high last month. Samsung shares again took a hit following a rout on Tuesday, despite forecasting a more than 1,800 per cent surge in second-quarter operating profit on the back of strong AI chip demand.
Losses were also recorded in Tokyo, Shanghai, Sydney, Singapore, Wellington and Taipei. However, Hong Kong’s Hang Seng Index bucked the trend, rising more than one per cent.
“After AI and tech sentiment had dominated market moves over the last couple of weeks, investors are now forced to move back to focusing on geopolitical tensions,” said Nick Twidale of AT Global Markets. “And this should dominate market sentiment, especially if we see a further escalation in the coming sessions.”
The dollar strengthened against its peers as the prospect of another hit to oil supplies fuelled concerns that inflation could remain elevated, potentially putting pressure on the Federal Reserve to hike interest rates.
With AFP
