Tanker attack in Gulf of Oman sends oil price soaring

One of the tankers on fire near the Strait of Hormuz on Thursday

Oil prices bounced back from a five-month low on Thursday after a suspected attack on two tankers in the Gulf of Oman fuelled fears that the industry could be caught up in escalating geopolitical tensions in the region.

Crude posted its strongest surge in five months after the US Navy reported the incident close to the Strait of Hormuz, a crucial waterway that transports a fifth of the world’s oil.

Brent crude rallied as much as 4.5pc to almost $63 a barrel, arresting a plunge in prices in recent weeks.

One of the tankers was “suspected of being hit by a torpedo” as tensions rise between Iran and its regional rivals and the US, said CPC Corp, the Taiwan state oil company that chartered the ship.

Iran has threatened to block the key oil artery after the US reinstated crippling sanctions on its oil exports.

The incident came shortly after two Saudi tankers were sabotaged in an attack that Washington blamed on Tehran. Iran distanced itself from the latest attack on the region's oil industry, calling the incident “suspicious”.

Crude prices have slumped into bear market territory after a surge in US production and trade tensions stoked fears of stuttering global growth.

“Fears of a demand slowdown are one of the main factors keeping a lid on oil prices at the moment,” explained Cailin Birch at the Economist Intelligence Unit.

She added that a pause in the US-China trade war “would buoy economic prospects and allow the supply-side risks in Iran and the Gulf to push oil prices higher”.

On Thursday oil cartel Opec slashed its forecasts for global demand this year, expecting a rise of just 1.1 million barrels a day, blaming trade war worries.

Fears of slowing global demand came as industrial production in the eurozone suffered its sharpest drop in 2019.  Factory output dropped 0.5pc in April compared to the previous month as the slump in Germany and its ailing car industry accelerated.

"The early evidence for May suggests that eurozone industry remained in the doldrums," warned Jack Allen-Reynolds at Capital Economics.