Despite increased tensions in the Middle East between the Iranian Republic and the U.S. over attacks on two ships in the Strait of Hormuz, crude oil was down for the week. President Donald Trump said that Iran was behind attacks on two fuel tankers in the Gulf of Oman.
“It was them that did it,” Trump said on Fox. “We will see what happens. We are being very tough on sanctions … We’re going to see how to stop (it),” Trump said, before claiming that because of his policies “they are pulling back from everywhere.”
The President did not outline his plans for a response, and neither did Secretary of State Mike Pompeo, who cited intelligence, the weapons that were used, and the sophistication of the attack as evidence for Iran’s involvement in the assault against “freedom-loving nations.”
Pompeo warned: the “United States will defend its forces, interests, and stand with our partners and allies to safeguard global commerce and regional stability.”
US Central Command released a video Thursday night arguing it shows a small Iranian boat sail up next to the tanker to remove an unexploded mine.
Washington does not seem to be preparing a military response to the attacks on the tankers, though it could increase naval patrols in the area. Trump has already sent an aircraft carrier strike force to the region and 1,500 troops, including a Patriot missile system. The President is generally far more dovish and less hawkish than Pompeo and his national security adviser John Bolton.
“I personally feel that it is too soon to even think about making a deal. They are not ready, and neither are we!” Trump tweeted.
Supreme Leader Ali Khamenei’s replied via Twitter. “I don’t consider Trump as a person deserving to exchange messages with; I have no response for him & will not answer him,” he wrote.
If Iran were behind the attacks, its message might be that it could derail the global economy by attacking transport ships in the Strait of Hormuz. Among the ships attacked was a Japanese tanker. Japanese Prime Minister Shinzo Abe was in Tehran to ease tensions between Iran, the US, Japan and allies.
“Reported attacks on Japan-related tankers occurred while PM @AbeShinzo was meeting with Ayatollah @khamenei-ir for extensive and friendly talks,” Iranian Foreign Minister Javad Zarif tweeted on Thursday. “Suspicious doesn’t begin to describe what likely transpired this morning.”
In the wake of the attack, stocks bounced, but by close on Friday had fallen. That stocks fell Friday had less to do with geopolitical tensions between Iran and the U.S. and more to do with tech shares falling lower, a decline led by chip giant Broadcam Inc. due to tensions between U.S. and China and negative Chinese economic data.
To be sure, investors continue to keep an eye on the Middle East after the Strait of Hormuz skirmish. News of the attacks sent oil futures north on Thursday – more than 2% – but they fell short of session highs Thursday at the bell. Crude futures increased 0.5% Friday, marking an overall loss for the week ending June 14. Thursday’s gains followed considerable losses on Wednesday.
On Friday, the International Energy Agency decreased its global oil demand growth forecast, saying there is “plentiful” supply to meet such growth.
“Geopolitical unrest is going to provide general support for prices, and depending on events, create sharp spikes higher but at the same time, supply and demand fundamentals continue to deteriorate,” said Tyler Richey, co-editor of Sevens Report Research.
West Texas Intermediate crude for July delivery increased 23 cents or 0.4% to settle at $52.51 a barrel on New York Mercantile Exchange. The Front-month contract, to be sure fell 2.7% for the week.
August Brent Crude increase 1.1% or 70 cents to $62.01 per barrel on ICE Futures Europe following a gain of 2.2% on Thursday. Brent was down for the week to 2%.
Images: WSJ and FinViz