Oil Prices Climb 2% After Ship Attack

Oil prices jumped more than 2% on Thursday after a cargo vessel came under fire from an unidentified projectile near Oman, forcing the United Nations to pause an operation escorting ships through the Strait of Hormuz and reviving fears that oil supplies from the Gulf could once again be at risk.

At a Glance

• Brent crude settled up $1.52, or 2.1%, at $75.26 a barrel
• U.S. West Texas Intermediate crude rose $1.58, or 2.3%, to $71.92
• The UN's International Maritime Organization paused its escort effort through the Strait of Hormuz
• U.S. officials told Reuters that Iran fired on the cargo ship
• About 20% of world oil supplies passed through the strait before the war began

What Happened Near Oman

The incident unfolded as international shipping was just beginning to find its footing again in one of the world's most important oil corridors. The Strait of Hormuz had effectively been blockaded by Iran following joint U.S. and Israeli strikes at the end of February, and only recently did a preliminary truce between Washington and Tehran allow tanker traffic to resume. Thursday's attack threw that fragile progress into doubt.

The International Maritime Organization had been guiding ships and crews through the strait as part of that recovery effort. It suspended the program after the cargo vessel reported what officials described as a suspected attack. Later that day, two U.S. officials told Reuters that Iran had fired on the ship as it tried to pass through, while Iranian authorities said they could not guarantee the safety of vessels traveling outside the strait's designated routes.

How the Markets Reacted

Brent futures climbed $1.52, or 2.1%, to close at $75.26 a barrel. West Texas Intermediate gained $1.58, or 2.3%, finishing at $71.92. The move marked a sharp reversal from Wednesday, when both benchmarks had closed at their lowest levels since February 27, the day before the war began, as tanker traffic through the strait had actually climbed to its highest point since the conflict started.

Gasoline futures in the U.S. spiked about 5%, and diesel gained roughly 4%. Analysts at Gelber & Associates pointed out that part of Thursday's rally came from technical buying and short covering, since crude had become increasingly oversold in recent sessions. Even after the jump, both Brent and WTI remain in oversold territory, a condition that has now persisted for more than a week.

Storage Levels and the Road to Recovery

Rystad Energy, the consultancy, warned that the physical supply chain is still under strain. Storage tanks across the Gulf are sitting at roughly 50% to 60% capacity, the firm said, and if tanker traffic through Hormuz does not pick back up soon, producers may be forced to scale back output. That would push a full market recovery into next year rather than allowing it to happen sooner.

Before the war disrupted shipping, roughly one fifth of the world's oil supply moved through the strait, which sits between Iran and Oman. That makes any renewed threat to navigation there a matter of global concern, not just a regional one.

Diplomacy Around the Strait

Secretary of State Marco Rubio spent Thursday wrapping up a Middle East trip meant to reassure Gulf allies who remain wary of the preliminary deal with Iran. He told regional partners that any final agreement would take their interests into account. The United States and the six member Gulf Cooperation Council jointly stated that a durable peace requires addressing Iran's ballistic missiles, drone program and support for proxy groups, and they called for navigation through Hormuz that is free, unconditional and unrestricted, with no tolls, fees or attempts at control.

Rubio was blunt about the stakes. If Iran threatens or blocks ships passing through the strait, he said,