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 rose on Tuesday following the U.S. government’s decision to cancel Iran’s license to sell crude and target it with military strikes, as tensions escalated between Washington and Tehran.
The move follows suspected Iranian attacks on ships that use the U.S. Navy’s protected route through the Strait of Hormuz, jeopardizing the interim peace deal signed by Washington and Tehran.
In retaliation, the U.S. launched a round of strikes against Iran alongside the license cancellation. A U.S. official told CNBC: “Iran will only reap benefits if they exhibit good behavior. Iran’s actions in the Strait were wholly unacceptable to the U.S. and will be met with consequences.”
Soon thereafter on Tuesday, U.S. Central Command said it had begun an assault, “to impose heavy costs for targeting and attacking commercial shipping crewed by innocent individuals in an international waterway”.
The U.S. last hit Iran with air strikes on June 26.
Following the development, at 17:01pm EDT on Tuesday, the Brent front-month oil futures contract traded 2.89% or $2.14 higher at $75.78 per barrel, while the West Texas Intermediate contract hit $72.20 per barrel, up 5.32% or $3.65.
Tehran said safe passage to commercial ships through the Strait of Hormuz would be granted under the interim deal reached with the U.S. but has insisted that vessels must use a northern route under its control.
However, the U.S. Navy is recommending and safeguarding a southern route along Oman’s coast that the Gulf states are using to export their oil and gas. Shipping liners are avoiding the traditional route through the middle of the strait over fears Iran may have mined it.
More Barrels, Lower Oil Prices
Despite Tuesday’s rise, oil prices have returned to pre-Iran War levels on expectation of more barrels reaching the global supply pool. The perception was fanned further by the decision of OPEC+ to raise its output over the weekend.
Following its latest meeting on Sunday, the select group of Russia-led oil producers and the Organization of the Petroleum Exporting Countries (OPEC) spearheaded by Saudi Arabia, said it would raise output by 188,000 barrels per day from August.
The latest move marked the fifth consecutive output hike by OPEC+ brought about by its seven core members – Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman.
The seven OPEC+ countries also noted that “this measure will provide an opportunity for the participating countries to accelerate their compensation.”
Meanwhile, the United Arab Emirates, which formally quit OPEC and OPEC+ on May 1, said its production had hit a six-year high of over 3.8 million bpd. Unshackled from OPEC constraints, the UAE’s stated ambition is for a production level of 5 million bpd.
A decision to quit OPEC+ sees the UAE join the ranks of non-OPEC producers such as Brazil, Canada, Guyana, Norway, and the U.S. who led production additions in 2025. The U.S. is currently the world’s largest producer of crude oil.
Prior to the UAE’s departure, OPEC accounted for 50% of the world’s traded oil and 35% of global production. While year-end data will likely reveal more, the UAE’s departure is expected to knock off 10% to 15% of OPEC’s capacity in any given production month.
But in a sign of an increasingly competitive landscape, Saudi Arabia also announced price cuts for the oil it sells.
For August, state-owned energy major Saudi Aramco has set the official selling price for its flagship Arab Light crude to Asia at $1.50 a barrel below Oman/Dubai crude average price. It marks the biggest level of monthly discount seen by the market in over two decades, as oil prices continue to trade at three-month lows.
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