Crude Oil rallies into 14-week highs as US and Iran spend the week attacking tankers

Crude Oil prices have soared to a 14-week high, as tensions between the United States and Iran escalate with both nations targeting tankers. West Texas Intermediate (WTI) crude settled just above $94.00, marking a 2% increase and reaching its highest point since May. The conflict began when Iran's Revolutionary Guards fired on American vessels and tankers near the Strait of Hormuz, a day after the US destroyed five Iranian tankers in the Gulf of Oman and off Kharg Island.

The US reported eight such attacks since Saturday, while Iran claimed ten. This aggressive behavior has led to a surge in war-risk premiums, with additional coverage costing between 7.5% to 12.5% of hull value. Consequently, the cost of shipping oil through the Strait of Hormuz has skyrocketed, with a Middle Eastern Gulf-to-China supertanker earning just under $704K daily, compared to $196K for a US Gulf route.

The embargo has resulted in reduced exports, with Iraq's Basrah loadings falling from 1.35 million barrels a day in July to 2.35 million in August. Despite this, Asian refiners have purchased over 40 million barrels of American Crude Oil for September, while American refiners operate near record rates into the autumn. The energy component of the US Producer Price Index (PPI) data, released on Thursday, is expected to show a 14.7% year-over-year increase, potentially influencing the Federal Open Market Committee's (FOMC) meeting on September 15 and 16.