Oil prices jumped as much as 4% on Thursday following attacks on tanker ships off the coast of Iran, renewing fears of conflict in the Middle East following a series of strikes last month.
The vessels sustained significant fire damage and their crews have been evacuated, according to multiple shipping agents and chartering sources. The attacks occurred in the Gulf of Oman, near the Strait of Hormuz, the world’s busiest sea lane for oil shipments.
Brent crude, the international benchmark for oil prices, was up $2.02, or 3.4%, at $61.99 per barrel around 9 a.m. ET (1300 GMT). Brent earlier rose more than 4% to $62.64.
U.S. West Texas Intermediate crude rose $1.66, or 3.3%, to $52.80, after topping out at $53.45 earlier in the session.
The Kokuka Courageous, a chemical tanker that loaded in Saudi Arabia and was en route to Singapore, caught fire at the same time as the Front Altair just before 6 a.m. local time.
The cause of the fires remain unclear, but they’ve sparked fears of attack and come just weeks after alleged ship sabotage in the region.
A representative for BSM Ship Management, the Kokuka’s Singapore-based manager, said 21 crew had abandoned ship due to the “security incident”, which damaged the ship’s starboard hull. They were rapidly rescued from a lifeboat by a nearby vessel, according to the company’s spokesman.
“The Kokuka Courageous remains in the area and is not in any danger of sinking. The cargo of methanol is intact,” the spokesman said in a statement.
The ship is roughly 14 nautical miles off the coast of Iran and 70 nautical miles from the coast of the United Arab Emirates’ Fujairah, which was the site of alleged sabotage attacks on four tankers in mid-May that U.S. authorities have blamed on Iran. Iran denies any involvement.
When four tankers sustained damage in the attacks of May 12 — two Saudi-owned, one from the UAE and one from Norway — crews did not have to abandon ship, indicating that today’s attack is much more serious.
Fujeirah Port operations are normal, according to a Platts Global Alert citing shipping sources.
The Front Altair, chartered by Taiwan’s state-owned CPC Corp, was scheduled to carry a cargo of naptha, a petrochemical feedstock, from the Persian Gulf to Japan, Platts said. Its owner, Norwegian company Frontline, could not be immediately reached for comment.
Neither ship was under Saudi charter, and the Front Altair and Kokuka Courageous were bearing Marshall Islands and Panama flags, respectively. The Kokuka is owned by Japanese company Kokuka Sangyo Ltd.
Kokuka Sangyo President Yutaka Katada told reporters that the Kokuka had been hit twice in three hours before the entire crew evacuated. The company first received reports of the attack around 0400 GMT, he told reporters.
United Kingdom Maritime Trade Operations, a division of the U.K. Royal Navy, said it is currently investigating the incident and has urged “extreme caution” amid mounting tensions between Iran and the U.S.
Iranian Foreign Minister Javad Zarif addressed Thursday’s incident on Twitter, writing, “Suspicious doesn’t begin to describe what likely transpired this morning.”
Tehran has been hosting Japanese Prime Minister Shinzo Abe for a two-day visit aimed at easing tensions between Iran and the U.S.
Iranian state media has reported that two oil tankers were targeted in explosions, but did not providing evidence.
A spokesman for the US Navy’s Fifth Fleet in Bahrain told the Associated Press that his command was “aware” of the incident and was seeking further details. U.S. Naval ships are in the area and are “rendering assistance” after forces in the region received two separate distress calls, the Fifth Fleet said.
‘Extreme caution’ advised as U.S.-Iran tensions simmer
A series of attacks in the UAE and Saudi Arabia that are being blamed on Iran have pushed tensions to new highs, prompting the U.S. to deploy more troops and military hardware to the region, including 1,500 additional troops, bomber task forces and aircraft carriers.
In an area responsible for the shipment of one-third of the world’s seaborne oil, fears are rife that a miscalculation or further provocation could lead to all-out conflict. Still, both Iran and the U.S. insist that they do not want war or escalation.
The fires took place against the backdrop of a brewing standoff between the U.S. and Iran one year after President Donald Trump withdrew from the 2015 Iran nuclear deal and reimposed heavy sanctions on the country. The deal, signed with international powers under the Obama administration, which was supposed to see financial relief in exchange for limits to its nuclear program.
More than a million barrels of oil per day have been wiped off the market as Washington’s sanctions endeavor to bring the exports of OPEC’s third-largest producer to zero. This has contributed to the crippling of Iran’s economy, which the U.S. administration says will continue unless Iran “acts like a normal country” and ceases its support of terrorist proxies in the region and ballistic missile testing.
Iran has responded to the sanctions by threatening to ditch its obligations under the nuclear deal — which had promised economic relief in exchange for limits to its nuclear development — and return to higher levels of uranium enrichment.