The US said Iran is responsible for attacks on two oil tankers Thursday in the Gulf of Oman, with one ship catching fire, sharply escalating tensions over the security of oil supplies via the key Strait of Hormuz shipping chokepoint.
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"On April 22, Iran promised the world that it would interrupt the flow of oil through the Strait of Hormuz, it is now working to execute on that promise," US Secretary of State Mike Pompeo told reporters Thursday.
Crude futures initially jumped on Pompeo's remarks, with the NYMEX July futures contract rallying 67 cents to $52.80/b. Prices, however, pulled back after Pompeo stressed the US would use economic and diplomatic tools against Iran, and did not mention a military escalation.
NYMEX July crude settled $1.14 higher at $52.28/b, while ICE August Brent settled $1.34 higher at $61.31/b.
The tankers, the Front Altair and the Kokuka Courageous, were both damaged, brokers, chartering sources and a shipping agents said, in apparent attacks that came one month after a similar incident in nearby waters off Fujairah.
The strategic Middle Eastern oil port is just outside the Strait of Hormuz, on the Gulf of Oman.
The Strait of Hormuz, which leads to the Persian Gulf, is a critical chokepoint through which 30% of the world's seaborne oil transits. Japan relies heavily on crude imports from the Middle East, most of which pass through the strait.
Brent crude futures jumped almost 4% immediately after the attacks on Thursday. At 1550 GMT, ICE August Brent was up $1.46 at $61.43/b, while NYMEX July crude was trading $1.44 higher at $52.58/b.
The Front Altair, carrying 75,000 mt of naphtha feedstock from the Persian Gulf to Asia, was hit by three detonations on board the ship early Thursday causing a fire, according to the Norwegian Maritime Authority. Pictures of the tanker released by Iranian media after incident show a major fire still burning on one side.
Bermuda-based tanker owners Frontline denied initial reports the ship had sunk. The crew was rescued by a passing ship, and no injuries are reported, the Norwegian Maritime Authority said.
The tanker was loaded at the UAE's Ruwais port June 11, with the cargo bought from state Abu Dhabi National Oil Co. by Taiwan's CPC Corp., according to that company.
ADNOC could not be reached for immediate comment.
The Japanese-owned Kokuka Courageous was carrying methanol and suffered hull damage in the incident, 70 nautical miles from Fujairah and about 14 nautical miles off the coast of Iran, tanker operator BSM Ship Management said. It said the crew abandoned the vessel but the ship was not in danger of sinking.
The US 5th Fleet, based in Bahrain and tasked with protecting the commercial shipping in the area, confirmed the incident and said it was assisting the tankers with US Navy ships.
The Norwegian Maritime Authority urged Norwegian ships to exercise "extreme caution" in the region.
The reported attacks came to light during a visit to Iran by Japanese Minister Prime Minister Shinzo Abe, who had met Iran's Supreme Leader Ayatollah Khamenei earlier in the day after meeting Iranian President Hassan Rouhani on Wednesday.
The tankers were loaded with "Japan-related cargoes" and were attacked near the Strait of Hormuz, triggering an emergency ministerial meeting, Japan's Minister of Economy, Trade and Industry said.
Given the timing of the attack, Iranian Foreign Minister Mohammad Javad Zarif described the incident as "suspicious" in tweet early Thursday.
Japan cut off its purchases of Iranian crude in April to comply with US sanctions targeting Tehran's oil sector, but has been keen to regain those lost supplies even as US officials have vowed to cut off Iranian exports.
"The details remain unclear ... but the attacks fit Iran's recent pattern of reacting to tightening US sanctions," said Paul Sheldon, S&P Global Platts Analytics' chief geopolitical adviser. "Similar incidents in the months ahead would be unsurprising, as they target US interests and allies while providing Iran with plausible deniability."
A source at the Port of Fujairah said the port received a distress call about a ship being on fire. Fujairah port operations are normal, the source said.
The incident follows last month's attack on four tankers, also in the Gulf of Oman just outside the Strait of Hormuz. Four tankers -- two Saudi-owned, one UAE-flagged and the other Norwegian-flagged -- were attacked in waters near off Fujairah on May 12. Pompeo on Thursday also blamed Iran for that attack, as well as an attack on two oil pipelines in Saudi Arabia last month.
"Iran is lashing out because the regime wants our successful maximum pressure campaign lifted," Pompeo said. "No economic sanctions entitle the Islamic Republic to attack innocent civilians, disrupt global oil markets and engage in international blackmail."
US National Security Advisor John Bolton previously said naval mines "almost certainly from Iran" were used in the attacks earlier this month. A spokesman for the Iranian foreign ministry called that a "ludicrous claim," according to Iran's semi-official Fars news agency.
Iranian President Hassan Rouhani recently suggested Iran could disrupt oil flows through the strait in response to US calls to bring down Iran's oil exports to "zero" under its latest sanctions on the OPEC producer.
-- Staff report, email@example.com
-- Edited by Jim Levesque, firstname.lastname@example.org