The Biden administration is likely to increase crude oil sanctions on Iran, an OPEC member, in response to Iran’s support for the Palestinian militant group Hamas, according to Helima Croft, the head of global commodity strategy at RBC Capital Markets. Croft’s comments come as Israel is expected to launch a ground offensive into Gaza, which she believes could influence the West’s stance toward Iran.
Israel has imposed a “complete siege” on the Gaza Strip for over two weeks, cutting off essential supplies such as food, water, fuel, and electricity in response to a devastating attack by Hamas.
Croft stated that the United States appears to be attempting to delay an Israeli ground operation in order to evacuate the hostages and hundreds of Americans trapped in Gaza. However, she suggested that some form of escalation in Gaza is expected. The reaction of oil prices to the Israel-Hamas conflict has been relatively calm thus far. However, Croft noted that the impact on crude supplies from Iran could depend on the nature of a potential ground operation and the potential widening of the conflict in the broader Middle East.
Oil prices experienced volatility on Wednesday as market participants closely monitored long-term economic concerns and the possibility of disruptions in Middle East oil supply. Brent crude futures with December delivery were trading at $88.34 per barrel, up 28 cents from the previous day’s settlement, while U.S. West Texas Intermediate crude futures with December expiry stood at $83.87, up around 10 cents from the previous session.
Croft highlighted the rising pressure from the U.S. Congress to impose sanctions on Iran’s crude oil exports as a retaliatory gesture. She believes that the Biden administration, at the very least, will consider curbing Iranian exports. According to Croft, Iranian exports have reached levels seen before the reintroduction of sanctions in 2018 by the Trump administration. The aim would be to prevent Iran from providing financial support to groups like Hamas.
Croft expects such measures to be implemented soon due to increasing bipartisan pressure in Congress to cut off Iranian financing for groups like Hamas. The U.S. Department of the Treasury did not provide immediate comment when approached for a response.
Previously, President Biden cautioned Iran to “be careful” after the Hamas attacks on Israel. Senators from both major parties are reportedly preparing sanctions to assist the U.S. government in enforcing sanctions against Iranian crude oil. Republican Senator Joni Ernst, who has long advocated for sanctions on Iranian oil, is expected to lead the bill, with Democratic Senator Richard Blumenthal serving as co-leader.
Ernst emphasized the need to enforce existing sanctions against Iran’s crude oil and urged Iran to stop funding terrorist organizations. The ongoing Israel-Hamas conflict has intensified calls for action against Iran.
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