Brent Crude and WTI have both leapt two per cent following a report by Reuters that an Iranian tanker is ablaze in the Red Sea 60 miles from the Saudi port of Jeddah.

Iranian news agencies are reporting the tanker is ablaze and leaking oil into the Red Sea after being hit by two missiles. They are labelling it a “terrorist attack.

The obvious worry will be that this is a reprisal by Saudi Arabia following drone and missile attacks a few weeks ago on its own oil processing facility.  The truth, of course, maybe far more straightforward than that. The Iranian tanker may well have just had a mechanical mishap causing the explosion rather than the spin put by the Iranian media.

The former though would represent a very dangerous escalation in the Middle East tensions across the Straits of Hormuz and if so oil prices could be set for a strong up move. At this stage, we will have to wait for more details to emerge.

Brent Crude and WTI spot are one dollar higher at $60.15 and $54.35 a barrel respectively.

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