Brent crude closed at $72 a barrel on Friday, the lowest price since February 27, the day before the first American and Israeli strikes on Iran. Oil dropped more than 10 percent for the week, the largest decline in a month. Thursday's drone strike on a cargo ship transiting the Strait of Hormuz did not reverse the fall. By Saturday morning, Iran had struck again.
The Attack
The Islamic Revolutionary Guard Corps hit the MT Kiku with a one-way attack drone early Saturday as it transited the Strait of Hormuz. The Panama-flagged crude tanker was carrying Qatari oil to the port of Fujairah in the United Arab Emirates. It was the second commercial vessel attacked in three days, after the cargo ship M/V Ever Lovely was struck on Thursday. The United States responded to the first attack with strikes targeting Iranian air defenses, drone storage facilities, cruise missiles, targeting radars, and minelaying capabilities. Iranian drones separately targeted Bahrain, which its Foreign Ministry called a blatant violation of sovereignty. The ceasefire signed ten days earlier was, by any conventional measure, broken.
The Reframe
Ebrahim Azizi, head of the Iranian parliament's national security commission, disagreed. "This is not a violation of the ceasefire," he wrote. "It is ceasefire management." He added: "The Strait of Hormuz is governed by Iran, so: Respect the rules." Iran did not deny attacking the vessels. It reclassified the attacks as acts of governance.
The Loading
On Friday, satellite imagery captured two Very Large Crude Carriers operated by Saudi shipping company Bahri loading crude at Ras Tanura, the world's largest oil export terminal. Each VLCC carries approximately two million barrels. It was the first confirmed loading inside the Persian Gulf since early March, when the Hormuz blockade forced Saudi Aramco to reroute exports to its Red Sea port at Yanbu. Saudi crude exports had fallen from more than seven million barrels per day to roughly four million during the conflict. The VLCCs at Ras Tanura signaled that Saudi Arabia considers the strait navigable regardless of Iranian drone strikes on other nations' tankers.
The Fewer Ships
For most of June, the strait ran at roughly a third of prewar vessel traffic. More than a hundred ships transited daily before the conflict. Then volume surged: in a single 24-hour period this week, seventy-two ships moved twenty million barrels of oil through the waterway, matching prewar throughput. US Energy Secretary Chris Wright confirmed the figure. The recovery did not wait for the ceasefire to hold.
The Management
The market heard Azizi and priced him correctly. Oil did not spike on Thursday's attack. It fell on the loading. Iran wants the strait open and governed. The 60-day memorandum of understanding signed on June 17 gave Iran dollar-denominated oil sales for the first time in more than four decades. Closing the strait would end those sales. Allowing free passage would surrender the leverage that produced them. "Ceasefire management" threads the needle: oil flows, but Iran sets the terms.
The Position
Brent at $72 prices the probability that oil flows, not the probability that peace holds. As long as VLCCs load at Ras Tanura and exit through Hormuz, the price falls regardless of how many drones Iran launches at vessels that did not request passage. Saudi Arabia will tolerate this arrangement as long as its own tankers are not targeted. Four months of rerouting through Yanbu proved the kingdom can function without the Gulf. But seven million barrels per day through Ras Tanura is worth more than four through Yanbu, and that arithmetic outweighs the cost of accepting Iranian "management." The ceasefire, the sanctions waiver, and the toll-free passage all expire on August 21. Iran is establishing the terms of transit before the exemption runs out.