US reimposes oil sanctions after Iran strikes ships near Strait of Hormuz

By Adam Cancryn, David Goldman, CNN

(CNN) — The Trump administration is reimposing sanctions on Iranian oil sales in retaliation for a series of attacks on commercial ships near the Strait of Hormuz.

“Iran will only reap benefits if they exhibit good behavior,” a US official said in a statement. “Iran’s actions in the Strait were wholly unacceptable to the United States and will be met with consequences.”

The move marks the latest challenge to the fragile ceasefire between US and Iran, and eliminates one of the central concessions made to the Iranian regime in exchange for its reopening the Strait of Hormuz.

It has jolted global oil prices — Brent rose 3% on the news to $76 a barrel but remains close to pre-war levels. US oil surged nearly 6%, rising back above $70 for the first time since June 30.

The US Treasury Department had initially agreed to lift sanctions on the sale of Iranian oil for 60 days as part of the ceasefire agreement, which Treasury Secretary Scott Bessent characterized at the time as a show of confidence in the two nations’ “productive talks.”

The pact allowed traffic through the strait to increase, contributing to a sharp decline in global oil prices. Yet the ceasefire has since been tested on multiple occasions, after Iran fired on ships in or near the strait.

The administration did not immediately signal how long the sanctions would be reimposed or under what conditions it would consider lifting them again. A notice published Tuesday by the Treasury Department said only that its earlier temporary sanctions relief had been “revoked and superseded in its entirety.” It gives buyers of Iranian oil until July 17 to wind down any transactions in progress.

The removal of penalties on foreign investors that do business with Iran marked a significant shift from roughly five decades of US policy.

Trump and other members of his administration have claimed that sanctions would be lifted only if the regime upheld its end of the bargain — including immediate demilitarization of the Strait of Hormuz and eventual commitments related to ending its nuclear program.

But Iran has repeatedly attacked vessels carrying goods through the reopened strait, claiming that they violated rules that Iran had set for approved transit. The strait is an international waterway, and the United States has maintained that Iran has no right to impose any restrictions on maritime travel.

Iran’s Foreign Ministry spokesperson said Tuesday that commercial vessels face risks if they use routes not coordinated with Iran or tamper with the ship’s tracking equipment, Reuters reported. Esmaeil Baghaei insisted that Iran is fulfilling its commitments under the memorandum of understanding with the US when it comes to managing the strait, and he urged countries in the region and shipping companies to refrain from actions that “contradict” the MOU.

In an interview with Iranian state TV, Mohsen Rezaei, an adviser to Iran’s supreme leader, said it was “quite clear that the US will lead the negotiations to failure.”

When sanctions were lifted, Iran was able to freely sell tens of millions of barrels of oil sitting in floating storage on oil tankers. The agreement had granted Iran the immediate ability to transport, insure, sell and, importantly, gain proceeds from its oil through financial institutions.

That was crucial to a regime that makes about 50% of its revenue from oil sales, according to the US Energy Information Administration.

Now that sanctions are back on, it’s not clear how the United States plans on enforcing those restrictions — and whether it plans to stop Iranian oil from changing hands via another military blockade in the Strait of Hormuz, which would represent a significant military escalation. A US blockade imposed in April effectively cut off all Iranian oil from leaving the Persian Gulf.

Iran has relied on a shadow fleet of oil tankers for years that the regime used to evade US sanctions, selling most of its oil to China. Iran exported roughly 50 million barrels of crude oil in June, mostly through its shadow fleet, according to an analysis by TankerTrackers.

It’s not clear who — if anyone — is buying the oil that Iran moved out of the strait, however. Western buyers had wanted assurances that the oil they were purchasing wasn’t going to be re-sanctioned, predicting this outcome, noted Homayoun Falakshahi, an oil market analyst at Kpler.

China needs to refill the oil stockpiles it drew down during the war, but Chinese demand for oil fell sharply during the spring, and JPMorgan analyst Natasha Kaneva expects that demand will rebound very slowly as the country switched over to coal-firing plants and ramped up electric vehicle sales.

This story has been updated with additional reporting.

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