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WASHINGTON — The fragile ceasefire between the United States and Iran appears to be unravelling, sending oil prices soaring once more as the two countries exchange attacks and threaten further military action.
The latest fighting began after three commercial tankers were attacked while travelling through or near the Strait of Hormuz, the narrow waterway responsible for carrying roughly one-fifth of the world’s oil consumption.
The United States blamed Iran for the attacks and responded with strikes against more than 80 targets, including Iranian air defence systems, coastal radar3729 installations, missile capabilities, command networks and dozens of small military boats.
It has been widely reported that Iran said its forces retaliated by targeting U.S. military installations in Bahrain and Kuwait.
The renewed fighting represents the largest exchange of attacks between the two countries since they signed a memorandum of understanding in June aimed at extending their ceasefire and beginning negotiations toward a permanent peace agreement.
The agreement required Iran to allow commercial shipping through the Strait of Hormuz while Washington temporarily eased sanctions on Iranian oil exports.
The United States has since revoked the sanctions waiver, while the future of the agreement itself is increasingly uncertain.
U.S. President Donald Trump, speaking Wednesday at the NATO summit in Ankara, said he believes the memorandum has effectively collapsed.
“I think the MOU is over,” Trump said.
Trump said negotiators could continue discussions with Iran but questioned whether further talks would accomplish anything.
“I might let my wonderful negotiators keep talking,” Trump said. “I personally think it’s a waste of time.”
Trump also threatened additional military strikes against Iran and suggested the United States could again impose a naval blockade targeting Iranian oil exports.
“We may put back the blockade,” Trump said.
The renewed fighting immediately rattled energy and financial markets.
Brent crude oil climbed more than five per cent Wednesday to around US$78 per barrel, its highest level in about two weeks. Oil prices had fallen toward pre-war levels as investors increasingly believed the ceasefire would hold and negotiations could produce a permanent agreement.
The attacks have renewed concerns over the security of the Strait of Hormuz, one of the world’s most important energy corridors.
Any sustained disruption to tanker traffic through the waterway could restrict global oil supplies and push prices higher, increasing fuel costs and inflationary pressures around the world.
The uncertainty also weighed on stock markets. Major U.S. indexes opened lower Wednesday, while European markets declined as investors moved away from riskier assets.
Trump has suggested the military confrontation could escalate further.
Speaking at the NATO summit, Trump said the United States could again attack Iran and threatened strikes against critical infrastructure, including electrical facilities.
“It may be a big attack, and it’ll knock out a lot of stuff,” Trump said.
Trump also said U.S. forces struck Kharg Island, the hub responsible for handling most of Iran’s crude oil exports, but avoided damaging oil infrastructure.
“We attacked Kharg Island last night, knocked out a piece,” Trump said. “I said, ‘Don’t touch the oil, because maybe we’ll take over Kharg Island.'”
Trump said additional attacks could occur as early as Wednesday night.
“They may hit it again tonight,” he said.
It remains unclear whether negotiations between Washington and Tehran will continue or whether the renewed attacks will lead to a broader military confrontation.
It has been widely reported that Iran has accused the United States of violating the ceasefire agreement by launching attacks and restoring sanctions on Iranian oil exports.
The United States maintains Iran violated the agreement first by attacking commercial shipping in the Strait of Hormuz.
Further attacks on ships, Iranian oil infrastructure or U.S. military installations in the Gulf could deepen the conflict and threaten the flow of oil through the Strait of Hormuz.
For energy markets, the immediate question is whether the renewed fighting remains limited or develops into another sustained conflict capable of disrupting global oil supplies.
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