Brent crude jumped almost 3% on Friday to nearly $103 (£75) a barrel, then slid back to about $100, after American and Iranian forces traded fire in the Strait of Hormuz. Each side blamed the other.
Washington said its strikes were self-defence, a reply to “unprovoked” Iranian attacks on US ships as they left the Gulf through the strait, which lies south of Iran. Tehran told its state media the opposite: that the US had broken the ceasefire reached in April. According to Islamic Republic of Iran Broadcasting, Iran’s military first accused American forces of targeting its ships, an oil tanker among them, as they headed toward the strait. It also described “aerial attacks” along the nearby coastline, and said Iranian forces hit back at US military vessels, causing “significant damage.”
The US military rejected that. It said none of its ships had been hit, and US Central Command added that it was not looking to widen the conflict.
Trump’s account
President Donald Trump said three US destroyers took part. On social media he claimed several Iranian small boats had been “completely destroyed” and that missiles aimed at the American ships were “easily knocked down.” To ABC News he went further, calling the Iranian strikes “just a love tap.”
He insisted the ceasefire still stood. Talks with Tehran were continuing, he told reporters, and he repeated the American demand that Iran must never have a nuclear weapon. “The talks are going very well, but they have to understand if it doesn’t get signed, they’re going to have a lot of pain,” he said. “I believe they want the deal more than I do.”
Iranian state media offered a calmer line of its own, reporting that the situation “is back to normal now.”
A strait already choked
More than a fifth of the world’s oil and gas normally moves through Hormuz. Traffic there has been effectively blocked since the war began on 28 February, when the US and Israel attacked Iran. Oil traded around $70 a barrel before the fighting. Earlier this week Trump said the war would be “over quickly” as Washington pushes for a framework that could lead to fuller negotiations.
Markets are not convinced. Huifeng Chang, an economics researcher at the National University of Singapore, said traders see the ceasefire as “fragile” and have priced it that way, even with both governments playing down the tension. Chris Beauchamp, chief market analyst at the investing platform IG, was blunter: “As last night’s clashes show, even a start to negotiation seems a long way off.”
Costs beyond the oil price
The war has pushed up other fuels too. Jet fuel has risen by about half. IAG, the owner of British Airways, said on Friday it expects a fuel bill of €9bn (£7.8bn) this year, roughly €2bn more than in the previous year. The group has already fixed the price on about 70% of the fuel it will buy for the rest of the year and sees “no issues with fuel availability” in its main markets. Its shares still dropped by more than 5% in early London trading.
Beauchamp said the shares’ limited recovery since April points to thin confidence in a full rebound until the conflict is settled.
Sources
- Oil prices rise after US and Iran exchange fire in Hormuz strait
- Oil prices rise after US and Iran exchange fire in Hormuz strait
