Oil price increases have moderated following reports that the United States and Iran have agreed to stop attacking each other. This development comes after tensions were heightened by an attack on a supertanker carrying Qatari crude near the Strait of Hormuz.
Brent crude futures initially rose by as much as 1.9% to $73.39 per barrel before paring some of those gains, while West Texas Intermediate (WTI) crude futures were trading around $70 per barrel. The weekend saw a series of tit-for-tat actions, with Tehran striking the tanker near the Strait of Hormuz and the US subsequently launching strikes on Iranian military targets. According to a report by Axios citing unnamed US officials, the two sides have agreed to hold talks in Doha on Tuesday.
The attacked Very Large Crude Carrier (VLCC), named 'Kiku,' was carrying approximately 2 million barrels of crude oil. Its last known signal placed it near the port of Fujairah in the Gulf of Oman, with its status shown as "not under command." It remains unclear to what extent this latest escalation has impacted oil shipments through the critical Strait of Hormuz.
"The market is increasingly viewing these price moves as tactical rather than structural," said Haris Khurshid, Chief Investment Officer at Chicago-based Karobaar Capital LP.
Despite an increase in shipping traffic, and a statement from the US Central Command on Saturday that commercial vessels continue to transit the Strait of Hormuz, some tankers have reportedly chosen to turn back. With hundreds of vessels potentially still in the Persian Gulf, shipowners are likely to remain cautious about navigating this strategic chokepoint.
August Brent crude futures were up 0.8% at $72.53 per barrel. August WTI crude futures gained 1.1% to $69.97 per barrel.
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