Oil prices edged higher in early Asian trade on Monday after another weekend of escalation in the U.S.-Iran war. At the time of writing, WTI was trading at $92.14 per barrel, up 0.72% on the session, while Brent had gained 0.63% to $96.89. The muted scale of the move suggests markets had largely priced in a weekend of strikes and counter-strikes, with traders instead watching for any disruption to physical crude flows through the Strait of Hormuz, the chokepoint that normally handles roughly a fifth of global seaborne oil trade.

On Saturday, U.S. Central Command (Centcom) reported that it had struck three Iranian oil tankers in response to the IRGC targeting two U.S. warships with ballistic missiles. The three tankers hit were the M/T Downy, M/T Stark 1, and M/T Kylo, struck near Kharg Island, Jask, and in the Gulf of Oman, respectively. Following the attack, Admiral Brad Cooper said the message was clear: "If you shoot at two of our ships, we will impose an even higher economic cost —taking out three of yours."

On Sunday, Centcom also updated the figures for its naval blockade against Iran. Since the blockade resumed on July 14, U.S. forces have redirected 92 commercial vessels, disabled 3, and boarded 2.

In Tehran, Iranian parliament speaker Mohammad Bagher Qalibaf declared that the era of "proportionate responses" is now over and warned that future retaliations from Iran would be "faster, heavier and more painful." Meanwhile, Mohsen Rezaei, secretary of Iran's Supreme National Security Council, suggested that Iran would soon announce a new restricted zone outside the Strait.

Exactly how much oil is currently passing through the Strait of Hormuz remains unclear. U.S. Energy Secretary Chris Wright claimed over the weekend that more than 9 million barrels per day of oil are being exported via water routes, with pipelines carrying another four or five million. Iran's military, for its part, has continued to describe the Strait as completely closed to vessel traffic, with the stated aim of ensuring not a drop of oil leaves the region. Independent tanker tracking suggests the reality lies somewhere in between those claims: TankerTrackers.com estimates that flows averaged about 5.04 million bpd over the latest 28-day period. Even that estimate carries considerable uncertainty, as a growing number of vessels have been turning off their AIS transponders.

The widening gap between official U.S. figures, Iranian claims, and independent tracking data has itself become a market factor, as traders navigating the region's waters have less reliable information on which to base decisions, and shadow-fleet activity complicates verification.

Regardless of how much oil is currently getting through, the most recent economic campaign against Iran appears to be having an effect, with reports of economic pain in the country rising significantly. Whether that will bring Iran back to the negotiating table or produce a more erratic and intense conflict remains to be seen. What to watch in the coming days is whether Iran follows through on Rezaei's threatened restricted zone outside the Strait, and whether the boarding and redirection totals from the U.S. blockade continue to climb.

By Josh Owens for Oilprice.com

Source: OilPrice.com