In what has become an Alanis Morissette-level irony, the US is now back on the brink of all-out war with Iran, less than one week after the administration's biggest Iran hawk was shown the door. Having read the writing on the wall, the Iranians have decided to release a UK-flagged oil tanker that they have had in detention for nearly two months, Bloomberg reports.
The decision to release the UK tanker comes a few weeks after Britain released the Iranian-flagged Grace 1/Adrian Darya 1 tanker, a decision that the UK swiftly came to regret after the tanker appeared to violate assurances that it wouldn't deliver its cargo of oil to Syria (violating EU sanctions in the process).
Washington has blamed Iran for this weekend's attack on Saudi Arabia's oil production facilities, which are expected to cut Saudi oil output in half until repairs can be completed. The attack was purportedly carried out by Yemen's Houthi rebels, who have a long history of launching attacks on Saudi soil. But President Trump and Secretary of State Mike Pompeo have placed blame for the attacks squarely on the Iranians. As we noted over the weekend, the timing of the attack is suspicious, coming as the kingdom renews its push to float 5% of Aramco in what's expected to be the largest-ever IPO. The offering would benefit from higher oil prices. Many have questioned why Saudi Arabia's missile defense capabilities failed to stop the attack.
Iran has denied any responsibility for the attack.
This weekend's attack wiped out 5% of the world's oil supplies. The Kingdom believes it can restore one-third of the lost production capacity by the end of this week.
The UK tanker, the Stena Impero, will be released "in days," according to Abbas Mousavi, spokesman at the foreign ministry in Tehran. The judicial process to clear the ship for release is nearly finished, and once it's done, the ship can leave Iran.
Iran seized the ship on July 19 in retaliation for the UK's seizure of the Adrian Darya 1.
Of course, the administration still has other options for punishing Iran short of instigating a military conflict, including cracking down on countries, including US allies, who are still buying Iranian oil in violation of US sanctions.
US Energy Secretary Rick Perry
Speaking Monday at the IAEA, US Energy Secretary Rick Perry said he believes the oil market will react "positively" to this weekend's attack in Saudi Arabia, Reuters reports.
"Despite Iran’s malign efforts, we are very confident that the market is resilient and will respond positively," he said in a speech.
Perry also slammed Iran, and urged Washington's allies to do what they can to hold Tehran accountable.
"The United States wholeheartedly condemns Iran’s attack on Saudi Arabia and we call on other nations to do the same. This behavior is unacceptable. It’s unacceptable and they must be held responsible. Make no mistake about it. This was an attack on the global economy and the global energy market."
To put this in context, international oil prices surged as much as 19% before coming off their highs, the biggest intraday jump since the 1991 Iraqi invasion of Kuwait.