Oil settles down 7% after Iran attacks US military base in Qatar, not tankers
A pumpjack operates at the Vermilion Energy site in Trigueres, France, Jun 14, 2024. (Photo: REUTERS/Benoit Tessier)
HOUSTON: Oil prices settled down more than 7 percent on Monday (Jun 23), losing more than US$5 a barrel after Iran took no action to disrupt oil and gas tanker traffic through the Strait of Hormuz, but instead attacked a US military base in Qatar in retaliation for US attacks on its nuclear facilities.
Brent crude futures LCOc1 closed down US$5.53, or 7.2 percent, at US$71.48 a barrel, while US West Texas Intermediate crude (WTI) CLc1 eased US$5.53, or 7.2 percent, to US$68.51.
Brent's 7.2 percent drop was the steepest since August 2022. The benchmark traded in a US$10 range, the widest since July 2022.
Both benchmarks were down nearly 9 percent in after-hours trading.
"Oil flows for now aren't the primary target and is likely not to be impacted, I think it's going to be military retaliation on US bases and/or trying to hit more of the Israeli civilian targets," said John Kilduff, a partner at Again Capital.
Oil fell sharply after Iran retaliated against US airstrikes on its main nuclear sites with a missile attack on the Al Udeid US airbase in Qatar, the largest US military installation in the Middle East. No US personnel were killed or injured in Iran's attack, two US officials told Reuters.
In early trade in Asia, Brent rose almost 6 percent as investors worried the Iranian retaliation would involve disrupting oil exports from the Middle East Gulf. Iran has threatened to shut the Strait of Hormuz, a narrow channel off southern Iran that around a fifth of global oil supply passes through on its way to refineries worldwide.
Iran, OPEC's third-largest crude producer, said the US attack on its nuclear sites expanded the range of legitimate targets for its armed forces.
A telegraphed attack on a well defended US base could be a first step in reducing tensions provided there are no US casualties, Energy Aspects said in a post.
"Unless there are indications of further Iranian retaliation or escalation by Israel/the US then we may see some geopolitical risk premium come out of the price in subsequent days," it said.
There was no interruption to QatarEnergy shipments or production after the attack, a source with direct knowledge of the matter said, and no other Iranian attack detected at any US military base other than in Qatar, a US military official told Reuters. Qatar is one of the world's largest exporters of liquefied natural gas, and all its shipments pass through the Strait.
Iraq's state-run Basra Oil Company said international oil majors including BP, TotalEnergies and Eni had evacuated some staff members working in oilfields.
"In one sense, we've seen this movie before. All the geopolitical tensions we've seen in the Middle East, whether it's Israel, Iran or others, we have yet to see the closure of the Strait of Hormuz, even though the issue always rears its ugly head," said Andy Lipow, president of Lipow Oil Associates.
At least two supertankers made U-turns near the Strait of Hormuz following US military strikes on Iran, ship tracking data shows, as more than a week of violence in the region prompted vessels to speed, pause, or alter their journeys.
US President Trump expressed a desire to see oil prices kept down amid fears that ongoing fighting in the Middle East could cause them to spike. On his Truth Social platform, he addressed the US Department of Energy, encouraging "drill, baby, drill" and saying, "I mean now."
Investors are still weighing up the extent of the geopolitical risk premium, given the Middle East crisis has yet to crimp supply.
HSBC expects Brent prices to spike above US$80 a barrel to factor in a higher probability of a Strait of Hormuz closure, but to recede again if the threat of disruption does not materialise, the bank said on Monday.
