Oil prices surged on Wednesday, briefly topping $80 a barrel after renewed fighting in the Middle East and the reinstatement of US oil sanctions on Iran.
Brent, the benchmark for two-thirds of the world's oil, was up 6.26 per cent to $78.80 a barrel at 12.23am UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 5.44 per cent higher at $74,27 a barrel.
US President Donald Trump said on Wednesday that the interim deal signed with Iran to end the war was "over". He added that he does not want to engage with Tehran.
US Central Command said its forces have begun more strikes against Iran "to further degrade their ability to threaten" tanker traffic through the Strait of Hormuz.
The US launched strikes on more than 80 targets in Iran on Tuesday after Tehran was accused of attacking three commercial vessels in the Strait of Hormuz.
Iranian state media reported explosions across southern Iran, including in Sirik, Qeshm Island, Kharg Island and Bandar Abbas.
The US also said it was revoking a general licence that authorised the sale of Iranian oil, placing new economic pressure on Tehran. The waiver was granted under the interim peace deal signed by both countries late last month and gave Tehran 60 days to sell its oil without being subject to punitive measures.
Meanwhile, Iran's top negotiator and Parliament Speaker, Mohammad Bagher Ghalibaf, accused the US of breaching the interim deal between the countries. “The era of bullying and extortion is over. It leads nowhere. We don't fold,” he said on X after the US strikes.
Iran's Khatam Al Anbiya Central Headquarters also issued a warning on Wednesday that any party providing support to US military operations against Tehran could be attacked. Sirens were activated in Kuwait and Bahrain on Wednesday morning, officials said.
“The renewed escalation has reignited concerns over supply disruptions through the Strait of Hormuz, with attacks on … commercial vessels highlighting the continued vulnerability of regional energy infrastructure,” said Soojin Kim, research analyst at Mitsubishi UFJ Financial Group.
“Going forward, the latest developments are likely to restore part of the geopolitical premium that had largely unwound in recent weeks, although the broader outlook will depend on whether the conflict escalates further or diplomatic efforts resume.”
Brent, which touched nearly $126 a barrel during the peak of the war, dropped below its prewar $72.87 a barrel last week on easing regional tensions and concerns of a supply glut.
“In the event of renewed de-escalation, however, it remains unclear how low oil prices could go," said Ipek Ozkardeskaya, senior analyst at Swissquote. "The previous pullback was mainly driven by the supply side of the story. Yet one major uncertainty remains: demand. More specifically, what will China do?”
China, which reduced its oil purchases during the Iran war, is reportedly returning to international markets to replenish its reserves on lower prices.
“If prices rise again, China may stop buying,” Ms Ozkardeskaya said. Higher energy prices because of renewed geopolitical tensions could also reverse the recent easing in inflation expectations, she added.
