US Pounds Iran, Tehran Strikes Back in Biggest Exchange Since July

  • The US and Iran carried out their biggest exchange of fire since July between September 1 and 2, renewing fears of a return to full-scale conflict after both sides had withheld fire for weeks. US forces struck Iran’s southern coast, while Tehran retaliated against American bases across the region.
  • The US military indicated that it targeted air defences, radar systems, maritime assets, mine-laying capabilities and communications sites. Washington stated that the strikes were in response to recent Iranian attacks on commercial shipping and US forces in the region.
  • Iran responded by striking what it described as US assets in Bahrain, Jordan, Kuwait and Iraq, warning that further US attacks would be met with heavier and more widespread responses. Iran claimed US forces were killed in Jordan and northern Iraq, although US officials indicated that initial assessments showed no casualties.
  • Tensions around the Strait of Hormuz also intensified, with Iran blacklisting another 11 ships, bringing the total to 56. These vessels could face fines, confiscation or detention if they attempt to transit without Tehran’s permission. However, Washington maintained that the strait remains open, with more than 17 million barrels of oil exiting on August 31, 2026.
  • The renewed hostilities weighed on global markets. US stocks declined on September 1 amid rising oil prices and escalating Middle East hostilities, while Asian and European stocks fell following the latest airstrikes. Wall Street subsequently opened higher on September 2 as investors focused on AI developments. Meanwhile, Brent crude settled 1.0% higher at US$95.63 per barrel, after both Brent and WTI reached their highest intraday levels since July 24.
  • The escalation poses further risks to global energy markets, particularly given continued tensions around the Strait of Hormuz. The waterway carried around one-fifth of global oil and LNG consumed before the conflict, meaning further deterioration in physical flows through the region remains a key risk to oil prices.

(Source: Reuters)