Iran Suggests Oil Tanker Struck by Missiles
- Two missiles struck Iranian tanker traveling through Red Sea
- Incident happened off coast of Saudi Arabia
- Oil spiked 2%
In the early hours of Friday, it was reported that an Iranian oil tanker was struck by a pair of missiles off the coast of Saudi Arabia and the Red Sea. The incident, which some are still debating with regard to whether or not it was an act of aggression by Americans or American-led coalition forces, could lead to further destabilization in the area. There are a whole host of potential players involved.
Riyadh quiet, further threats ahead
There was little in the way of comment coming out of Saudi Arabia around the incident, even after officials were asked by the press. It is likely that this will only compound the tension through places like the Straits of Hormuz, which has been very tense until a few weeks ago. As we had entered a period of stability, this helped the oil markets calm down a bit recently. However, it now appears that we are going to face yet more maritime threats, and of course a standoff between the Saudi and Iranian governments.
Iranian state television suggested that the explosion caused damage to storerooms aboard the tanker and also caused a leak into the Red Sea near the Saudi Arabian port city of Jeddah. This will cause some environmental concerns, but the Iranians have also suggested that the oil leak has been closed. The tanker, identified as the Sabiti, is carrying over one million barrels of crude oil and could cause significant tension if it was in fact damaged.
However, images released by the Iranian Petroleum Ministry appeared to show no real visual damage to the ship from its bridge. That being said, it did not show signs of the tanker, but more importantly, satellite images of the area showed no visible smoke. The question now becomes whether this was real or some type of false flag.
Increasing tension suggests that oil markets could get a little bit of a boost, as the market has been very bullish. Having said that, however, the lack of demand continues to put a lot of downward pressure on the crude oil market as well. When looking at the longer-term charts, we are essentially at the bottom of a range, so this will probably keep crude oil above the area just below. That’s because the market has seen the area as supportive in both the Brent and the West Texas Intermediate crude oil markets.
As tension increases, we will get the occasional pop higher, but whether or not they can hang onto those gains would be an entirely different question. This seems to be yet another bit of noise out there to keep the market somewhat supported, but it’s probably not enough to make oil markets break out for a longer-term move anytime soon.