Oil prices rose as much as 4% on Thursday following attacks on two tanker ships off the coast of Iran that renewed fears of conflict in the Middle East after a series of strikes last month.
The vessels sustained significant damage and their crews have been evacuated, according to shipping agents and chartering sources. The attacks occurred in the Gulf of Oman, near the Strait of Hormuz, the world's busiest sea lane for oil shipments.
It was not immediately clear who was responsible for the attacks, but they occurred against the backdrop of heightened tension in the Middle East and between the U.S. and Iran. The Iranian leadership has repeatedly threatened to block traffic in the Strait of Hormuz in retaliation for U.S. sanctions on the Islamic Republic.
Crude futures briefly jumped back above 3% after U.S. Secretary of State Mike Pompeo blamed Iran for the attacks.
U.S. West Texas Intermediate crude settled $1.14 higher at $52.22, gaining 2.2% on the day after topping out at $53.45 earlier in the session.
Brent crude, the international benchmark for oil prices, rose $1.34, or 2.2%, to $61.31 per barrel. Brent earlier rose as high as $62.64.
Earlier Thursday, oil prices fell toward five-month lows, continuing a steep slide fueled by concerns that the U.S.-China trade war will slow global growth and dent fuel demand. On Wednesday, crude futures fell 4% on the ongoing demand fears and another big jump in U.S. crude stockpiles.
OPEC on Thursday cut its forecast for oil demand growth in 2019 as the 14-nation producer group pumped at its lowest level in five years.
But the attacks in the Gulf of Oman renewed geopolitical concerns that have largely abated in recent weeks.
"This is the kind of nightmare headline that you don't necessarily want to wake up to," John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC's "Squawk Box."
Iran has been hosting Japanese Prime Minister Shinzo Abe for a two-day visit aimed at easing tensions between Tehran and Washington. Iranian Foreign Minister Javad Zarif addressed Thursday's incident on Twitter, writing, "Suspicious doesn't begin to describe what likely transpired this morning."
The Iranian navy is investigating the incidents, according to state-owned news agency IRNA. The crew aboard one of the ships, the Front Altair, were initially picked up by a nearby ship, but were transferred to an Iranian rescue vessel and brought to a port in southern Iran, according to IRNA.
The crew aboard the other ship, the Kokuka Courageous, were brought aboard the U.S.S. Bainbridge, the Associated Press reported. U.S. naval ships provided assistance after forces in the region received two separate distress calls, the U.S. Navy's Fifth Fleet in Bahrain said.
Details of the incidents were still emerging on Thursday from companies that own, manage and charter the ships.
The chemical tanker Kokuka Courageous suffered a breached hull above the water line during a "suspected attack," Reuters reported, citing Cyprus-based Bernhard Schulte Ship management. The tanker was loaded with a cargo of methanol in Saudi Arabia and was en route to Singapore.
A representative for BSM's Singapore office said 21 crew had abandoned ship due to the "security incident," which damaged the ship's starboard hull. They were rapidly rescued from a lifeboat by a nearby vessel, according to the company's spokesman.
"The Kokuka Courageous remains in the area and is not in any danger of sinking. The cargo of methanol is intact," the spokesman said in a statement.
The ship is roughly 14 nautical miles off the coast of Iran and 70 nautical miles from the coast of the United Arab Emirates' Fujairah, which was the site of alleged sabotage attacks on four tankers in mid-May that U.S. authorities have blamed on Iran. Iran denies any involvement.
The Front Altair, chartered by Taiwan's state-owned CPC Corp, was scheduled to carry a cargo of naptha, a petrochemical feedstock, from the Persian Gulf to Japan, Platts said.
Kokuka Sangyo President Yutaka Katada told reporters that the Kokuka had been hit twice in three hours before the entire crew evacuated. The company first received reports of the attack around 0400 GMT, he told reporters.
The vessel's owner, Norwegian company Frontline, said it was on fire, Reuters reported.
The Front Altair and Kokuka Courageous were bearing Marshall Islands and Panama flags, respectively. The Kokuka is owned by Japanese company Kokuka Sangyo.
United Kingdom Maritime Trade Operations, a division of the U.K. Royal Navy, said it is currently investigating the incident and has urged "extreme caution" amid mounting tensions between Iran and the U.S.
In an area responsible for the shipment of one-third of the world's seaborne oil, fears are rife that a miscalculation or further provocation could lead to all-out conflict. Still, both Iran and the U.S. insist that they do not want war or escalation.
The attacks took place against the backdrop of a brewing standoff between the U.S. and Iran one year after President Donald Trump withdrew from the 2015 Iran nuclear deal and reimposed heavy sanctions on the country. Under the deal, signed with international powers under the Obama administration, Iran was supposed to see financial relief in exchange for limits to its nuclear program.
More than a million barrels of oil per day have been wiped off the market as Washington's sanctions endeavor to bring the exports of OPEC's third-largest producer to zero. This has contributed to the crippling of Iran's economy, which the U.S. administration says will continue unless Iran "acts like a normal country" and ceases its support of terrorist proxies in the region and ballistic missile testing.
Iran has responded to the sanctions by threatening to ditch its obligations under the nuclear deal — which had promised economic relief in exchange for limits to its nuclear development — and return to higher levels of uranium enrichment.