The truce between the United States and Iran has broken down as the two sides continue to exchange blows.
The US military carried out a third night of strikes on Iran after President Donald Trump said he was reinstating a blockade of Iranian shipping.
The United Arab Emirates said at least two tankers came under Iranian fire in the strategic Strait of Hormuz, which Iran claims it has the right to control.
Trump previously said the United States would ensure the Strait of Hormuz remains open and said it would charge a 20 percent toll for passage.
“Both sides seem to believe that it is in their interests to continue to escalate and that it is not in their interests to compromise,” said Will Todman, a senior fellow at the Middle East Program at the Center for Strategic and International Studies.
Iran’s Islamic Revolutionary Guard Corps said its missile and drone attacks destroyed the air traffic control radar of the US Navy’s Fifth Fleet in Bahrain.
He also said his naval and aerospace forces hit the Patriot radar and C-RAM early warning radar system in Bahrain.
The IRGC added that fuel storage tanks and a control center for unmanned boats were also destroyed, and response operations were ongoing.
Meanwhile, the US Embassy in Abu Dhabi and the US Consulate General in Dubai have canceled consular meetings until Wednesday due to the regional security situation, the embassy said in a security alert.
The statement came after the United Arab Emirates said two Emirati-flagged oil tankers were hit by Iranian missiles in the Strait of Hormuz, killing one sailor.
Australian motorists on alert
The price of oil has risen again as tensions in the Middle East continue. (ABC News: Chris Taylor)
Worries have once again gripped Australian motorists as the price of oil has risen sharply over the past 24 hours.
Analysts say if oil prices hold up, it could lead to more hip pain at the gas station.
This followed US President Donald Trump’s announcement that the US would reinstate the blockade of the Strait of Hormuz and charge ships to transit through the passage.
In the evening, on his Truth Social page, Mr. Trump announced that from now on the United States would be called the “Custodian of the Strait of Hormuz.”
“In the interest of FAIRNESS, (the United States) will be reimbursed 20 percent of the value of all cargo shipped for any costs necessary to carry out the work of providing safety and security in this very volatile region of the world,” he said.
“The process and formation will begin immediately.”
Constant news about the war in Iran: Read our blog for the latest news on the Middle East crisis.
Immediately after publication, the price of West Texas Intermediate (WTI) oil increased by 5 percent.
By late afternoon trading in Asia, WTI rose another 2.5 percent to $80.07 a barrel.
Brent crude was up more than 10 per cent from Monday evening trade (AEST) at $85.56.
Middle East tensions at center of oil surge
The price of oil has fallen in recent weeks to levels not seen since the start of the war with Iran.
Oil tankers and cargo ships line up in the Strait of Hormuz, seen from Khor Fakkan, United Arab Emirates, in March. (AP: Altaf Qadri)
The price drop was helped by the signing of a memorandum of understanding (MOU) between the US and Iran, although it was not without criticism.
“The problem with the Memorandum was that it was deliberately vague,” said Middle East analyst Will Todman.
“It allowed both sides to interpret it as they saw fit, and I think that’s what led to this breakdown over the last week or so.”
Australia avoids next round of global energy crisis
The price of oil began to rise late last week and over the weekend when Iran again announced the closure of the Strait of Hormuz.
About 20 percent of the world’s oil and gas supplies pass through this key waterway, meaning higher prices are being felt around the world following its closure.
“It makes sense that oil is rising because obviously there is (always) a fear that Iran will close or partially close the Strait of Hormuz,” said Commsec equity strategist James Gruber.
Analysts also say Trump’s Social Truth post has exacerbated already existing tensions in the Middle East.
Analysts say US President Donald Trump’s social media posts are exacerbating tensions with the Middle East. (Reuters: Leah Mills)
“Under Trump, you never know how seriously to take such statements, but Gulf allies will not be happy with this plan, and it almost certainly violates international law,” wrote National Australia Bank senior analyst Jason Wong.
“A 20 percent fee would add about $16 to the cost of each barrel of oil passing through the strait on a conventional supertanker.
“It remains to be seen whether this plan will be implemented, or perhaps not, and whether it is simply a negotiating tactic aimed at getting Iran to pause its military strikes on shipping in the area.”
Where can I get oil from here?
Commsec’s James Gruber said oil prices would continue to rise as commodity traders became increasingly concerned about global oil supplies.
Fuel prices on March 18 in Sydney after oil supplies were impacted by the war in Iran. (ABC News: Chris Taylor)
“The risk with oil going forward is that if the Strait of Hormuz were to be closed, as Trump has acknowledged, oil reserves in the developed world would be extremely low,” Mr. Gruber said.
“If the Strait (closure continues), how long developed countries, including Australia, can survive without this oil is a big question.
“Some analysts suggest it could be four to six weeks before we have to introduce things like rationing.”
Automotive group NRMA said recent events in the Middle East had created an atmosphere of “chaos” affecting financial markets.
“Chaos is the new normal in the Middle East,” said Peter Khoury of the NRMA.
“Markets have begun to price in the chaos.”
Mr. Khoury noted that regional benchmark oil prices, including Tapis crude oil, have increased over the past 24 hours.
Why Oil Refineries Matter
Tapis is the bulk of the crude oil Australia is seeking to purchase for its remaining domestic refineries, with the price rising $1.70 in the last 24 hours and rising.
Wholesale prices, or the prices gas stations pay for refined oil in the form of gasoline or diesel, have so far “remained relatively stable,” Mr. Khoury said.
He warned petrol prices for motorists would rise if the “chaos continues”.
However, the Royal Automobile Club of Queensland (RACQ) is not concerned about the latest rise in oil prices.
Chief economics and affordability officer Ian Jeffries told the ABC: “At this point we are not expecting the kind of price shock we saw back in March and late February.”
However, he noted that tax breaks on diesel and gasoline should be completely eliminated by August.
“Of course, the timing is very bad.”
– he said.
Traders and farmers in the line of fire
For businesses, the price of diesel rose a further 1.4% as of midday AEST, while natural gas for August delivery fell 0.4% to $2.89 ($/million British thermal units).
The price of diesel has also increased, affecting traders and farmers. (Attached: Lara Pacillo)
The price of urea fertilizer rose to US$415.50 per tonne on Monday, up 7.23 percent, and is now up 12.3 percent this month alone.
Rabobank general manager of research Stefan Vogel said the price of urea will depend on demand from key importing countries including Brazil and India in the coming weeks as they prepare to plant crops.
If demand is high, the price will rise, although he doesn’t see a “massive increase” in prices.
Mr Vogel noted that Australian farmers largely “have everything they need for the winter season”.
This will help ease price pressure on Australian farmers until at least October this year, he said.
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