(Majid Saeedi/Getty Images)
key takeaways:
- The Treasury Department revoked Iranian oil sales waivers effective July 7 following the tanker attacks in the Strait of Hormuz.
- Oil prices rose as the move threatened a 60-day peace accord, stoking supply fears and stoking market volatility.
- Negotiators are working toward a final agreement, but a sanctions expert said rescinding the waivers could end the memorandum of understanding.
The US Treasury Department revoked a waiver allowing the sale of Iranian oil in response to attacks on tankers in the Strait of Hormuz, putting an interim peace deal between Washington and Tehran in jeopardy.
The Office of Foreign Assets Control said no new transactions for Iranian oil could take place on or after July 7. A previous version of the relaxation was issued in the wake of the peace accord and allowed transactions for 60 days until August 21.
Oil prices rose after the news, with Brent crude rising above $75 per barrel and US crude reaching around $72 per barrel after futures settlement.
The decision came after three ships in the waterway were attacked, apparently by Iran. Tehran has repeatedly said it will not allow ships to pass through the waterway without its permission.
A US official, speaking under the customary condition of anonymity, said Iran would benefit from the deal with the US only if it shows good behavior. The official said Iran’s actions in the strait are unacceptable and it will have to face consequences.
But the official said negotiators are continuing to work in good faith toward a final agreement between the adversaries, showing the US is not ready to abandon the peace process.
An end to attacks on commercial shipping and US waivers were central elements of the memorandum of understanding that halted fighting between the US and Iran for 60 days. That agreement was intended to create space for more detailed negotiations over the fate of Iran’s nuclear program and the future of the strait.
According to Claire O’Neill McCleskey, co-founder of sanctions advisory firm Clarity Compliance Consulting and former head of OFAC’s compliance division, Iran’s attack and revocation of the license “could lead to the end of the MOU”.
The series of attacks is a reminder of the continued risks to ships passing through Hormuz, even as military forces are choosing to allow ships to transit through a passage near Oman’s coastline.
The change in US stance comes as oil flows and production from the Persian Gulf are beginning to reach pre-war levels. U.S. authorization of sales of Iranian oil played a key role in calming investor concerns about supply shortages and helped control oil prices.
Now, a return to hostilities and a renewed threat to energy flows through the vital Strait of Hormuz could once again throw global markets into renewed volatility.
Brent oil prices, the global benchmark, reached a high of $125 a barrel in late April, but returned to pre-conflict levels this month amid growing signs of recovery.
“This is an illogical move by Washington,” said Brett Erickson, managing principal of Obsidian Risk Advisors. “General License
