Iran-US Tensions Keep Risk Premium Locked in Crude Oil
The ongoing tanker strikes in the Strait of Hormuz have escalated tensions between the US and Iran, with both sides exchanging blows. The US forces struck three Iranian oil tankers on Saturday, destroying one near Kharg Island, which is Iran's primary export terminal.
Iranian forces responded by hitting three commercial vessels using unauthorized routes in the Strait of Hormuz and also targeted US vessels in other waters.
The fighting marks its seventh month, with last week's exchanges being the heaviest since July. The US has stated that it will not negotiate until Iran stops attacking ships, effectively closing the door on any near-term de-escalation.
This development keeps the risk premium locked into every barrel leaving the Persian Gulf, as Hormuz traffic dropped to just two ships on Saturday, with six making it through Sunday. The 10-day average is running at around 10 ships per day, the lowest since May and below the recent pace of 15.
The OPEC+ group met on Sunday but decided not to add new barrels to the market, leaving production unchanged for October. This decision could have provided a fresh supply against the disruption trade, but it did not give buyers the reason they needed to take some of the premium off crude oil.