US sanctions Persian Gulf Strait Authority in an attempt to discourage Tehran's dominance
The United States (US) Treasury Department said on Wednesday that it has sanctioned the Persian Gulf Strait Authority, the body Iran has set up to manage the Strait of Hormuz, the conduit for about a fifth of the global oil supply. US Treasury Secretary Scott Bessent said, "The Iranian military’s latest attempt to extort global maritime trade is proof that Economic Fury has left the regime desperate for cash." This move by Washington could lead to de-escalation in the US-Iran negotiations towards a permanent ceasefire.
Additional Information
The authority is a body Iran has set up to manage requests for passage through the Strait of Hormuz.
Tehran's grip on the strait has sent the world economy into turmoil.
It closed the strait after the US and Israel launched its war against Iran on February 28.
Anyone cooperating with the authority may be providing support to and receiving services from Iran's Islamic Revolutionary Guard Corps and may be sanctioned, the Treasury said in a statement.
The Persian Gulf Strait Authority published a map last week reaffirming Tehran's claims to a wide stretch of water on either side of the choke point.
Market reaction
There seems to be a positive response to oil prices after Washington's fresh sanctions. As of writing, the WTI Oil price trades 1.6% higher to near $89.80.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
