Tensions in Iran raise oil prices - US attacks and possible Iranian response "disturb" markets
Investors reacted to US strikes on Iran over the weekend, as Tehran and Israel continued to trade missiles on Monday morning. Brent crude rose about 1.53% to $78.19 a barrel, while West Texas Intermediate crude rose 1.48% to $74.93 a barrel.
On Sunday, US forces attacked three Iranian nuclear and military facilities, saying Tehran should not be allowed to possess nuclear weapons. The conflict, which was sparked by an Israeli attack on Iran on June 13, has sent oil prices soaring, due to Tehran's status as a major producer in the sector.
The nation also sits on the narrow Strait of Hormuz, through which most of the world's crude oil passes. Investors are concerned that Tehran could decide to bomb oil infrastructure in neighboring countries or block tankers from traveling through the Strait.
Shipping company Maersk said on Sunday it would continue to operate through the strait, adding: "We will continuously monitor the security risk to our specific vessels in the region and stand ready to take operational action as necessary."
According to ship tracking data compiled by Bloomberg, two tankers turned back while passing through the Strait of Hormuz on Sunday. The situation now depends on whether Tehran decides to choose aggression or a more diplomatic response to the US and Israeli attacks.
Iran could try to close the waterway by laying mines across the Strait or by attacking and seizing ships. However, this would likely face a strong response from the US Navy, meaning the oil price hike may not be sustainable.
Some analysts also think that Iran is unlikely to close the waterway because the country uses it to transport its crude oil, mainly to China, and oil is a major source of revenue for the regime.
If Tehran were to successfully close the strait, it would cause a broader increase in prices for transported goods and complicate the deflationary process in the US, potentially keeping interest rates higher for longer.
On Monday morning, Trump also mentioned the possibility of regime change in Iran. "If the current Iranian regime can't make Iran great again, why not have regime change?" the US president said on Truth Social.
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