- Reports on Tuesday revealed that two tankers were hit near the Strait of Hormuz.
- Trump threatened to reimpose the naval blockade on Iranian ports.
- The US president said the ceasefire deal with Iran was over.
Oil prices jumped on Wednesday amid escalating tensions between the US and Iran. The US bombed Iran a day after two tankers were hit near the Strait of Hormuz. Market participants were concerned about supply disruptions after Iran warned it would close the Strait again. Meanwhile, FOMC minutes revealed a split among policymakers over the path of interest rates.
Reports on Tuesday revealed that two tankers were hit near the Strait of Hormuz. According to Iran, the hit came from the US. As a result, Tehran said it would no longer take part in negotiations. Moreover, on Wednesday, news sources reported that the US had bombed over 80 targets in Iran, causing widespread panic.
Brent futures (Source: Bloomberg, ICE)
The strikes had many worried about a fragile ceasefire, especially after Trump said it was over. The US president has also threatened to reimpose the naval blockade on Iranian ports. Nevertheless, when asked whether this would turn into a full-blown war again, he said it would not.
“I don’t think it’s going to start again,” the president said. “I think it’s going to go very quickly. They hit a couple of ships, and so we hit them much harder. When they hit, we hit 10 times harder.”
Before all this, oil prices were steadily dropping as talks between the two nations progressed in Qatar. Despite some pockets of hostilities, they continued negotiations through mediators. Already, talks had yielded so much. The Strait of Hormuz reopened, and traffic steadily increased.
At the same time, the blockade on Iranian ports and sanctions on its oil had ended. Talks were now focused on Iran’s nuclear activities. They had already agreed to have these activities monitored. All this had eased worries about a return to missile attacks. Oil erased its wartime gains, and inflation worries eased. However, sentiment has shifted again, and there is a possibility Iran will close the Strait of Hormuz. If this happens, oil might recover from its recent dip.
Elsewhere, the FOMC minutes released on Wednesday revealed that policymakers were split on the rate decision at the last meeting. However, they ended up holding rates. Traders are still expecting hikes, especially amid renewed tensions in the Middle East.