US Says It Destroyed 10 Iranian Tankers: Oil Market Impact

• CENTCOM says US forces have destroyed 10 Iranian oil tankers over the past week.
• US hitting Iran’s oil export infrastructure can also hurt the global oil market.
• Limited attacks may stabilize markets, but further escalation threatens global supply.

Iran’s Revolutionary Guard says it hit two US Navy ships in the Strait of Hormuz. However, the US Central Command (CENTCOM) calls that claim false, saying no American warship was hit and that all Iranian attacks failed.

At the same time, CENTCOM says US forces have destroyed 10 Iranian oil tankers over the past week, calling them part of a multibillion-dollar network funding the IRGC and its regional allies. 

Tanker Strikes Could Both Impact Iran and the Market

Provided what CENTCOM is saying is true, if the US keeps hitting vessels linked to Iran’s shadow oil trade, Iran could struggle to make money from oil exports and move its barrels around the region.

However, hitting Iran’s oil export infrastructure can also hurt the global oil market. Brent crude climbed past $100 a barrel on September 9, its highest since July, as traders reacted to the latest attacks and the growing threat to shipping in the Strait of Hormuz.

By some estimates, traffic through the strait has plummeted from about 8 million barrels a day in the last week of August to just around 1 million barrels a day this week. Considering the Strait of Hormuz normally moves about a fifth of the world’s oil and gas, the situation is quite serious.

The Question is Whether This Becomes an Oil Shock

In case the attacks stay limited to tankers directly linked to Iran, the market may eventually settle down. On the other hand, Iran retaliating by attacking more commercial ships, or the US continuing to expand its blockade, translates to a much bigger risk.

Higher crude prices would drive up costs across transportation, manufacturing, and energy bills, which keeps inflation high and makes it harder for central banks to lower rates. This would make a particularly tough environment for risk assets.

In that situation, stocks could get squeezed by higher costs and bond yields, while commodities might benefit from supply shocks. Also, Bitcoin and crypto could trade like risk assets at first, especially if investors start cutting back on leverage.

For traders, the key signal is whether the tanker attacks start to meaningfully reduce the volume of oil and other energy shipments passing through the Strait of Hormuz. Should that number continue to decline, $100 oil may not represent the upper limit.

Related: $100 Oil Could Be Bitcoin’s Next Problem