U.S. Strikes and Sanctions Trigger Oil Price Surge Amid Iran Tensions

Tugboats push the Djibouti-flagged crude oil tanker Glory Forever, carrying oil imported from the UAE, to the pier in Qingdao, Shandong province, China. (Photo: Yu Fangping)

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Oil prices surged on Tuesday after the U.S. government revoked Iran’s crude sales license and initiated military strikes, escalating tensions between the two nations.

The action followed reported Iranian attacks on vessels utilizing the U.S. Navy’s protected passage through the Strait of Hormuz, threatening the interim peace agreement between Washington and Tehran.

A U.S. official stated to CNBC: “Iran will only benefit if they demonstrate good behavior. Iran’s actions in the Strait were entirely unacceptable and will face consequences.”

In response, the U.S. Central Command announced a series of airstrikes aimed at imposing significant costs for targeting commercial shipping in international waters.

The U.S. had previously targeted Iran with air strikes on June 26.

At 17:01 EDT on Tuesday, the Brent crude futures contract rose 2.89% to $75.78 per barrel, while the West Texas Intermediate contract increased 5.32% to $72.20 per barrel.

Tehran claimed to adhere to the interim deal by allowing safe passage through the Strait of Hormuz but demanded commercial vessels use a northern route under its control.

The U.S. Navy is advising and protecting a southern route along Oman’s coast, which Gulf states are utilizing for oil and gas exports. Shipping companies are avoiding the traditional middle route due to fears of Iranian mining.

OPEC+ Output Increase and UAE Production Boost Counterbalance Price Rises

Despite Tuesday’s rise, oil prices have returned to pre-Iran War levels due to expectations of increased global supply. This perception was reinforced by OPEC+’s decision to raise output over the weekend.

Following its latest meeting on Sunday, OPEC+ members—led by Saudi Arabia and Russia—announced a production increase of 188,000 barrels per day starting August, marking their fifth consecutive hike.

The seven OPEC+ countries noted that “this measure will provide an opportunity for participating countries to accelerate their compensation.”

The UAE, having exited OPEC+ in May, reported its production hitting a six-year high of over 3.8 million bpd, with ambitions to reach 5 million bpd. Unshackled from OPEC constraints, the UAE’s production surge positions it among non-OPEC producers like Brazil, Canada, Guyana, Norway, and the U.S.—the world’s largest oil producer.

Saudi Arabia also signalled competitive pressure by cutting oil prices for August exports. State-owned Saudi Aramco set the official selling price for its Arab Light crude to Asia at $1.50 below the average of Oman/Dubai crude, the largest monthly discount in over two decades.

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