Sanctions Crack War Premium but Supply Risk Remains Elevated

The recent announcement of Washington's Iran sanctions package had an immediate impact on the oil market. The news led to a selloff, and traders who were positioned for an aggressive crackdown pulled the 'war premium' out of both contracts.

Operation Economic Outcast came with tough language but no enforcement dates, which seemed to allay some fears. However, the supply risk in the Strait of Hormuz continues to hold the floor.

The Strait is currently operating at near-shutdown volumes, and strategic reserves are sitting at levels not seen in four decades. This has kept minor trends on both WTI and Brent contracts turned down on the session.