Oil Prices Climb After U.S. Revokes Iranian Oil License Amid Mideast Tensions

Oil prices settled significantly higher on Tuesday and continued to climb in post-settlement trading amid escalating tensions in the Middle East. Brent crude futures settled up $2.17, or 3.01%, to $74.16 a barrel. U.S. West Texas Intermediate (WTI) crude increased by $1.89, or 2.76%, to settle at $70.44 a barrel. Both benchmarks saw further gains in after-hours trading.

The primary driver for the price surge was the U.S. government's decision to revoke a general license that had authorized the sale of Iranian oil. This action was taken in response to what U.S. Central Command described as Iranian attacks on three commercial vessels transiting the Strait of Hormuz. The U.S. military reportedly launched a series of strikes against Iran following the vessel attacks.

These events appear to jeopardize a memorandum of understanding signed in June by the U.S. and Iran, which was aimed at ending a conflict and reopening the critical shipping lane. Analysts noted the developments underscore the fragility of the ceasefire. "This shows just how fragile the ceasefire actually is," said Ajay Parmar, director of energy and refining at ICIS, adding that further attacks could add to market volatility.

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The Strait of Hormuz is a vital chokepoint for global energy markets, with about a fifth of the world's daily supply of oil and liquefied natural gas (LNG) passing through it prior to the recent conflict. The diplomatic situation remains tense, as Iran's foreign minister stated that talks for a final deal would not proceed if U.S. threats continued.

Other factors in the market on Tuesday included reports of Ukrainian drone strikes on Russian tankers and industry data from the American Petroleum Institute suggesting a drawdown of 399,000 barrels in U.S. crude oil inventories last week. Official government inventory data is expected to be released on Wednesday.