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US Oil Update: Crude Nears 1-Month High on Supply Risks, Sanctions

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Crude oil benchmarks surged more than 3% on Thursday and hit their highest in nearly a month as mounting shipping risks in the Strait of Hormuz, and new US sanctions on Iran rattled global energy markets.

Front-month West Texas Intermediate crude futures advanced 3.6% to $88.88 per barrel, while Brent futures were up 3.2% to $94.52/bbl. Both contracts hit their highest since July 24.

"Oil prices extended their rally amid growing concerns over tighter US sanctions on Iran," ING analysts noted.

UAE announced the immediate suspension of all economic and financial transactions with Iran, adding to regional tensions on Tuesday.

US President Donald Trump insisted that the Strait of Hormuz remains open and warned that any country providing a lifeline to Iran would face economic penalties.

However, Iranian officials maintained that the waterway is shut, and an Iranian parliamentary committee reportedly proposed a security bill that would seek to place transit under armed forces control and restrict certain vessels.

These maritime tensions intensified after three China-linked supertankers turned around in the vital chokepoint, while commercial tracking data showed depressed traffic due to military activity.

"However, vessel traffic through the SoH has weakened so far this week, with outbound energy tanker transits averaging 4/day, down from 6/day last week," Morgan Stanley analysts said in a note.

Additionally, the UK's Maritime Trade Operations Center reported that a tanker traveling through the Gulf of Aden was hijacked by six armed individuals and redirected toward Somalia.

Other supply-side constraints also impacted markets globally as Ukraine's military confirmed strikes on Russia's Taneco oil refinery in Tatarstan and the Tamanneftegaz oil terminal in Krasnodar, sparking fires at both facilities.

Meanwhile, US refiners increased crude processing to 17.4 million barrels per day for the week ending August 14, the fastest pace since September 2019, according to the US Energy Information Administration.

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