US President Donald Trump said his tentative ceasefire with Iran is done, raising the prospect of a renewed military conflict between the two countries.
Ceasefire Collapses, Middle East Tensions Escalate
The US carried out a new round of strikes in Iran targeting more than 80 sites and revoked a waiver allowing new sales of its oil, further imperiling a peace agreement after a series of attacks on ships in the Strait of Hormuz.
Both sides accused the other of violating the ceasefire. Three commercial ships were attacked in the Strait of Hormuz over the last day, the most since the agreement went into effect, with the US blaming Iran for the strikes.
The actions, taken in response to recent attacks, brought fresh volatility to energy markets and tested an already fragile peace agreement between Washington and Tehran.
Oil Surges on Supply Risks & Ripple Effects Across Markets
Brent hit the highest level in two weeks, advancing 5.3% to around $78 a barrel. The rebound, after futures had plunged in the second quarter as regional tensions cooled, could rekindle inflationary concerns in global markets and among policymakers.
Chicago soybean oil futures climbed to a three-week high after fresh US military strikes on Iran sent crude oil prices higher. As a major biofuel feedstock, soybean oil prices are often tied to movements in crude. When crude oil prices rise, alternatives such as biofuels become more attractive to buyers.
Stocks fell after President Donald Trump declared the ceasefire. S&P 500 futures fell 0.8% following the previous session’s selloff in chip stocks. The Stoxx 600 fell 1.5% as crude prices pushed bond yields higher. Treasuries ticked lower and the dollar wavered.
Iranian Oil Sales Face Pressure
Tens of millions of barrels of Iranian oil already on tankers have been left in limbo after the US walked back a waiver allowing the Islamic Republic to sell the crude.
There are around 63 million barrels of Iranian oil currently on the water, either in transit or idling, according to Bloomberg calculations based on Vortexa data. The crude is on vessels in the Persian Gulf and spread across Asian waters. Most of these ships are not indicating a clear destination or are signaling that they’re available for orders, meaning they haven’t found a buyer.
Even before the waiver was revoked, Tehran was struggling to sell its oil. That was partly due to a deluge of non-Iranian crude coming out of the Persian Gulf, meaning the barrels were no longer trading at a discount to alternatives, and also because buyers were wary of various risks still involved in the trade.
The trade faced a number of obstacles. European Union and UK restrictions remained in place, complicating insurance, and some ports may not have been willing to allow Iran’s dark-fleet ships to dock. Buyers were also wary of sudden changes in US policy.
There weren’t any recorded purchases of Iranian crude by Asian refiners outside of China since the waiver was issued, the traders said, although some sales may be kept under wraps due to their sensitivity.
One of the few remaining markets for the oil is China’s independent refiners, known as teapots, who were Iran’s main customers prior to the Middle East war. However, it’s likely Tehran would need to offer steep discounts to pique their interest.
