Oil benchmarks climbed on Thursday following an incident in Iraqi territorial waters in which two foreign tankers carrying Iraqi fuel oil were struck and caught fire, and as public and private actors weighed the implications of a major emergency release from global reserves.
At 0118 GMT, Brent futures had risen $5.69, or 6.19 percent, to $97.67 a barrel, while U.S. West Texas Intermediate crude was up $5.11, or 5.86 percent, at $92.36 a barrel.
Iraqi security officials said an initial investigation found that explosive-laden boats from Iran had hit the two tankers, which were then set ablaze. Farhan al-Fartousi, director general of the General Company for Ports, said the vessels were struck by unidentified attackers in Iraq's territorial waters and that both had caught fire.
The incident occurred against the backdrop of an International Energy Agency decision to release a record 400 million barrels of oil from strategic reserves, an emergency measure aimed at alleviating a sharp run-up in prices tied to supply disruptions stemming from the U.S.-Israeli war on Iran. The United States is providing the largest share of that release - 172 million barrels - from its Strategic Petroleum Reserve.
Some market analysts interpreted the tanker strikes as a direct reaction to the IEA announcement. Tony Sycamore, an analyst at IG, said: "This appears to mark a direct and forceful Iranian response to the IEA's overnight announcement of a massive strategic reserve release aimed at cooling runaway prices."
Other market strategists cautioned that the reserve release may be only a short-term remedy if physical supply lines remain under threat. "The IEA's release of oil reserves may be only a temporary solution, as disruptions to oil shipments through the Strait of Hormuz and a major production halt in some Middle Eastern countries could cause a long-term supply crunch," said Tina Teng, market strategist at Moomoo ANZ.
U.S. political and intelligence signals also featured in market commentary. U.S. President Donald Trump said Washington was in "very good shape" in its war on Iran and that the U.S. was "going to look very strongly at the straits." At the same time, U.S. intelligence indicates that Iran's leadership is still largely intact and is not at risk of collapse any time soon, according to sources familiar with the matter.
Market participants noted that the attacks and the broader geopolitical tensions were exerting upward pressure on oil prices amid no clear signs of de-escalation in the Middle East. That combination - active disruptions to shipments plus the potential for sustained regional production impacts - underpinned the market's reaction on Thursday.
Context and immediate market response
- Two foreign tankers carrying Iraqi fuel oil were hit and caught fire in Iraq's territorial waters; Iraqi authorities say explosive-laden boats from Iran were involved.
- Brent and WTI both rose more than 5 percent as the market digested the attacks alongside the IEA's unprecedented 400 million barrel release.
- The U.S. contribution to the IEA release is 172 million barrels drawn from the Strategic Petroleum Reserve.
What market participants are watching
- Whether the IEA's coordinated release will be sufficient to offset ongoing shipment disruptions in chokepoints such as the Strait of Hormuz.
- If further attacks or production halts in the Middle East emerge, which could extend upward pressure on global oil prices.
- Signals from political leaders and intelligence assessments about the durability of regional escalation or containment.