Iranian oil exports continue despite cancellation of 60-day sanctions waiver

Oil prices continued to rise on Tuesday, hitting their highest level in four weeks, as the US reimposed its naval blockade on Iran and the two countries escalated attacks in the Strait of Hormuz, increasing uncertainty about energy flows.

Brent crude futures rose $2.74, or 3.29%, to $86.04 a barrel, while US West Texas Intermediate crude rose $2.21, or 2.83%, to $80.35 a barrel.

Brent crude rose to its highest level since June 12, and WTI to its highest since June 16.

Soni Kumari, an analyst at ANZ Bank, said: 'Despite the signing of the memorandum of understanding and reaching an agreement, it did not even last a few weeks, and that is the concern the market is trying to digest currently.' She added: 'We believe the peak of escalation has passed, but there are upside risks to oil prices if these disruptions continue, which will keep prices in the range of $85-$90.'

Tensions between the US and Iran escalated this week, with US President Donald Trump reimposing a blockade on Iranian shipping and proposing a 20% fee to protect the Strait of Hormuz. The waterway is a vital artery for global energy trade, carrying about a fifth of the world's daily oil and LNG supplies before the conflict erupted.

Tim Waterer, chief market analyst at KCM Trade, said: 'The recent escalation, including the US reimposition of the blockade and Iranian responses, has clearly added new risks to the market.' He added: 'Although a complete closure of the strait has not occurred, the conflicting objectives of both sides have made the supply situation highly unstable.'

Shipping data released on Monday showed the number of tankers transiting the Strait of Hormuz over the past day fell to a two-month low, and analysts at Citigroup indicated an increasing likelihood of the Iranian regime withdrawing from the memorandum of understanding until after the US midterm elections, a scenario likely to boost oil prices in the long run. However, Iranian Oil Minister Mohsen Paknejad confirmed that Iranian oil exports continue as normal despite the US cancellation last week of a 60-day waiver from oil sanctions.

Priyanka Sachdeva, an analyst at Phillip Nova, said: 'The key variable to watch is the movement of crude oil through the Strait of Hormuz. Any actual closure of tanker traffic, prolonged reduction in vessel movement, or disruption to export flows would likely lead to another spike in oil prices.' She added: 'Conversely, if oil flow continues despite the military escalation, part of the current geopolitical premium may gradually fade.'

President Donald Trump stated on Monday that the US would reimpose a naval blockade on Iran and recoup 20% of the value of all shipments transported through the Strait of Hormuz, after Tehran announced its closure of the vital waterway. Trump said on Truth Social: 'The Strait of Hormuz is open, and will remain open, whether Iran likes it or not. We are reimposing the Iranian blockade.' He said: 'The United States of America will be compensated 20% of the value of all shipments transported, for all costs necessary to provide security and safety for this troubled region of the world.' He added that the process would begin immediately, but did not provide further details.

The US president had previously floated the idea in a phone interview with Fox News' 'Fox & Friends,' saying the US would likely take over management of the strait and should be compensated for it. He said: 'We will keep the strait, and perhaps run it. Control of the Strait of Hormuz, a vital artery for global oil supplies, has become a key battleground. Iran's effective blockade of the strait has driven up energy prices and heightened concerns about inflation globally.'

US and Iranian forces exchanged heavy missile and drone attacks over the weekend and into Monday, with Tehran announcing it had targeted US military facilities in the Gulf and kept the Strait of Hormuz closed, leading to higher oil prices.

The latest skirmishes represent a sharp escalation in the frequency and geographical scope of attacks over the past week, raising doubts about the interim agreement between the US and Iran signed last month to reopen the strait and halt hostilities while the two sides continue negotiations for another 60 days.

Meanwhile, China's crude oil imports in June fell 41.3% to their lowest in nearly a decade, with refinery utilization rates hitting a ten-year low due to weak domestic demand and restrictions on refined product exports to ensure energy security amid the Iranian war.