The price of Brent crude oil has risen more than 2 per cent on Thursday morning, following attacks on Lebanon by Israel.
On Tuesday night, a ceasefire deal was outlined and agreed between the US and Iran, leading to a massive fall in the cost of the commodity on Wednesday. Stock markets surged as optimism grew that the conflict could end soon and oil tankers would be able to once more move freely through the Strait of Hormuz.
But that already seems to be a precarious position, after Israel said more than 100 airstrikes were carried out across a 10-minute period on Wednesday.
Iran’s deputy foreign minister Saeed Khatibzadeh called Israel’s strikes in Beirut a “grave violation” of the ceasefire agreement and said everybody in the Middle East was expected to follow the agreement, therefore the US allies – of which Israel is one – must do likewise.
In addition, the real driver of lower oil prices will be ships passing through the Strait of Hormuz and there have been reports it remains mostly closed to transit. Foreign secretary Yvette Cooper said “a lot of work needs to be done” to get the shipping route fully reopened.
As a result, the price of oil rose back up to $98 (£73) per barrel on Thursday, having fallen as low as $90.50 one day earlier.
There have been several price spikes and falls across the course of the conflict, with the highest peak so far being around $119, while the price pre-Iran war was in the $65-70 corridor.
“Relief has now been reflected in market movements, but the next challenge is to turn this into belief,” noted Richard Hunter, head of markets at interactive investor.
“There have already been reports that the ceasefire is a fragile one. This has led to threats that Iran could withdraw from the truce if the attacks continue, while White House comments have remained aggressive as forces remain in the area, poised to act if necessary.
“In addition, the oil price rose by 2 per cent, although remaining below the psychologically important $100 per barrel level. There are conflicting descriptions of the current state of play in the Strait of Hormuz. The US insist that there has been an uptick in traffic, but apparently ships have been told by Iran that the strait remains closed. Indeed, tanker-tracker firms have reported a trickle of ships passing through compared to pre-war levels which, as a key negotiation strand, is one which needs to be fully resolved.
“Nor is it clear that the list of demands from the two parties have much common ground, such that this news-driven market will mean that volatility remains nearby.”
