U.S. President Joe Biden’s administration is likely to tighten crude oil sanctions against OPEC member Iran in response to the Islamic Republic’s backing of Palestinian militant group Hamas, according to Helima Croft, head of global commodity strategy at RBC Capital Markets.
Her comments come ahead of a widely expected ground offensive by Israel into Gaza, a move that Croft believes could set the tone for the West’s response to Iran.
It has been more than two weeks since Israel announced a “complete siege” on the Gaza Strip, cutting off food, water, fuel and electricity supplies after a devastating Hamas attack.
“It certainly looks like the United States is trying to delay an Israeli ground operation because they want to get out the hostages, they want to get out the hundreds of Americans that are trapped in Gaza, but the question is, is this going to be postponed indefinitely, but I think people are bracing for some type of escalation in Gaza,” Croft told CNBC’s Dan Murphy in Saudi Arabia on Wednesday.
She described the oil price reaction to the Israel-Hamas war as “sanguine” so far, but nevertheless said “a lot’s going to hinge on what does a potential ground operation look like” and that a widening of the conflict into the broader Middle Eastern region could affect the crude supplies of Iran.
Oil prices whipsawed on Wednesday morning, as market participants closely monitored long-term economic concerns and the prospect of Middle East supply disruptions.
International benchmark Brent crude futures with December delivery were trading at $88.34 per barrel at 10:20 a.m. London time (5:20 a.m. ET), up 28 cents from the Tuesday settlement.
Meanwhile, U.S. West Texas Intermediate crude futures with December expiry stood at $83.87, up around 10 cents from the previous session.
Rising congressional pressure
Tehran, which has historically financially supported Hamas, praised the Palestinian militant group’s multipronged terror attacks of Oct. 7 against Israel — but has denied involvement.
Croft said the West and the Biden administration would, “at a minimum,” consider a retaliatory gesture of curbing Iranian exports, which she estimates have climbed near levels seen before 2018, when former President Donald Trump’s administration reimposed sanctions against Tehran’s crude.
“The argument is, can you continue to allow Iran to keep the bank open for groups like Hamas? So, I think the Biden administration is going to have to tighten those sanctions.”
She expects such measures to come into effect soon, amid rising bipartisan U.S. congressional pressure to cut off the availability of Iranian financing for groups like Hamas.
The U.S. Department of the Treasury was not immediately available to comment when contacted by CNBC.
Biden previously warned Iran to “be careful” after the attacks by Hamas on Israel.
U.S. senators from both major parties are preparing sanctions to help the federal government enforce sanctions against Iran’s crude oil, Reuters reported on Oct. 19, citing the office of Republican Sen. Joni Ernst. The bill, which is to be spearheaded by Ernst, will reportedly be co-led by Democratic Sen. Richard Blumenthal.
Ernst, who has long called on the White House to enforce sanctions against Iranian oil, doubled down on this message amid the ongoing Israel-Hamas war.
“We need to be enforcing the sanctions that are already in place. The message to Iran should be: Stop funding these terrorist organizations. They need to do it now,” Ernst told Fox News on Sunday.