Oil Price: crude oil markets are still shaky despite the end of maritime 'incident;

 

Gulf of Oman crisis

The maritime incident involving a Panamanian-registered ship in the in the Gulf of Oman near the 25th parallel north that created buzz yesterday has ended; according to certain media reports, the same ship was involved in a similar situation in the region two years ago due to an issue over sanctions - or sanction-busting.

The British maritime agency, MKMTO, which initially reported the ‘hijacking incident’, now says that the incident is over and those who boarded the ship without authority, have finally left the ship. In short, the stand-off is over.

In response to the peaceful end of the incident, the crude oil prices recovered sightly in the early hours on Wednesday  from the losses they suffered yesterday, only to fall again, mainly due to the rising tension in the region, especially in the Gulf of Oman and of course, the Strait of Hormuz.

The tension started building in the region due to a deadly attack on an Israel-registered tanker on Friday, last week in which the Romanian captain of the ship died along with a British security officer.

Attacks of some form recently on oil tankers are nothing new in the troubled region: there had been mysterious explosions on board the ships in the past.

The attack in question, however, is significant, because in the previous incidents, there was no loss of life.

The US, UK and Israel meanwhile threatened Iran with what they call, a ‘proportionate response’, without elaborating further; Israel, meanwhile, says it will deal with the incident in its own way.

Iran denied its involvement in both incidents; it simply believes the enemies are setting stage for hostile acts.

Having sensed the pulse of the forthcoming response to the attacks, not only did Iran offer protection for the vessels through the Strait of Hormuz, but also promised assistance in the event of potential trouble; Iran says it wants the passage, through which a fifth of crude oil shipments pass every day, to be trouble-free.

Iran clearly does not want the ‘proportional reaction’, threatened by the US, spoil the inauguration of the new president, scheduled on Thursday.

The new president of Iran, Mr Ebrahim Raisi, who is portrayed as a pragmatist, meanwhile, said on Tuesday that he will work to get the sanctions lifted – the first clear indication of the attitude of the new administration towards reviving the JCPOA, 2015 Iran nuclear deal.

Analysts believe if Iran comes up with an explanation instead of denials over the two maritime incidents, there is still room for restarting negotiations over the JCPOA in the coming weeks; there have already been six rounds of negotiations with each making some progress; the gap between Iran and the rest of the signatories to the deal has narrowed down as well, in proportion to the relative success of the talks.

In this context, the response from the US and Israel to the attacks remains to be seen; it is not going to make negotiations any easier; on the other hand, the economic situation in Iran, the ground reality, does not let Iran stubbornly refuse to take the talks forward either; the circumstances have forced Iran to walk the tight rope.

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