Oil prices spike higher

The price of crude oil rose by 4% following attacks on two shipping vessels on Thursday.

The Norwegian owned Front Altair, which was carrying crude oil and the Japanese owned Kokura Courageous carrying methanol were struck while moving through the Gulf of Oman, near the strategically important Strait of Hormuz.

Initial reports suggest that both tankers were struck by limpet mines, which use magnets in attaching to the hull of a ship before blowing up.

All the crew from the two tankers were evacuated although one sailor from the Kokura Courageous was injured.

Who conducted the attacks?

The finger pointing at Iran as the culprit has resumed following similar attacks on four vessels in the region in May. US Secretary of State Mike Pompeo made a brief statement accusing Iran of the attacks.

He said that the assessment of Iran's culpability was based on intelligence, the level of the sophistication involved, recent similar attacks by Iran, the expertise and the weapons used.

Is Iran really responsible for these latest attacks?

Iranian Economic Crisis

Iran is really hurting now with the so-called maximum pressure President Trump is applying to the countries ability to trade across the globe.

Striking back asymmetrically against the US's interests in the region is a very dangerous game, given that Iran will lose heavily in any conflict with the US.

But it is possible that the Iranian leadership feels that it now has very little to lose, especially when it is unable to sell its main source of revenue oil, and as it struggles to upgrade or purchase equipment for its crumbling industries.

Furthermore, apart from the Iran-Iraq war (1980-1988), Iran very rarely engages in direct military confrontation with adversaries. It has a number of proxies in the region who act at its behest. However, none of its proxies in the region appear to have the capability to carry out this kind of operation.

Conspiracy theories

The Iranian foreign minister, Mohammad Javad Zarif suggested that the event is suspicious, pointing to the fact that it happened while Japan's Prime Minister Shinzo Abe was visiting Iran and meeting with Iran's Supreme Leader Ayatollah Khamenei. One of the attacked vessels is Japanese, and crucially Prime Minister Abe was in Iran was to deliver a message from his ally President Donald Trump to Khamenei, urging the Iranian leader to call Trump in order to discuss US-Iran tensions.

Is it possible that another player in the region carried out the attacks in order to precipitate a conflict between the US and Iran?

Yes, that is not beyond the realms of reality. However, this sounds like the usual conspiracy theories that swirl around that region.

A conflict between the US and Iran would suit Saudi Arabia's interests. However, even with all its high tech Western military equipment, US ally Saudi Arabia - Iran's major rival for influence in the region, does not appear to possess the military sophistication to pull this off twice - in May and now. This also excludes Saudi Arabia's closest allies in the region like Bahrain and United Arab Emirates.

Israel with the most powerful military in the region, has the pedigree and capability to do this. It would definitely like to see the US attack Iran - which has regularly calls for the destruction of the Jewish state - however this would be pushing the conspiracy theory too far.

What's worrying is that the crises is unlikely to be resolved soon. The Iranian Supreme Leader refused to discuss President Trump's message delivered by Prime Minister Abe. He insisted that Iran would not be bullied into negotiations.

The International Association of Independent Tanker Owners (Intertanko) has warned that if it becomes unsafe for tankers and other commercial vessels to go through the region, then insurance will almost certainly rise. Crucially, twenty percent of global crude oil passes through the Strait of Hormuz every day and any major escalation will mean that extra costs will have to be passed on to consumers.

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