US waives sanctions on Iranian oil to curb price surge amid conflict

The US Treasury Department has issued another 30-day waiver on sanctions on buying sanctioned oil on March 20; this time freeing international traders to buy Iranian oil shipments, in the hope of calming international energy markets and bring down the price of oil, Reuters reports.

The waiver, announced by the Treasury Department after market hours, allows Iranian oil already at sea to be sold and delivered, potentially bringing about 140mn barrels to global markets that will earn Iran an estimated $14bn. US Treasury Secretary Scott Bessent said the measure would help relieve pressure on energy supply as oil prices have surged above $100 per barrel.

“In essence, we will be using the Iranian barrels against Tehran to keep the price down as we continue Operation Epic Fury,” Bessent said on X.

However, confusion emerged as to how much oil would be available to the markets. Of the 140mn barrels, 100mn have reportedly already been sold to China and are not available to traders, leaving a total of only 40mn unclaimed barrels.

Tehran also issued a statement saying that it will withhold sales permission for the remain oil stored on ships at sea.

The decision follows on from a similar decision to soften sanctions on Russian oil with a 30-day waiver for India to also buy Russian oil currently stored on tankers at sea. That decision was made after markets suffering from a whiplash day of trading when oil prices suddenly jumped to over $120 per barrel on March 9, only to fall back to $85 again by the end of the day after Trump said the war was “pretty much over.”

The Treasury Department also softened sanctions on Russian oil on March 7, also allowing the sale of oil currently stored on tankers at sea, most of which was sold to India.

The administration has also temporarily relaxed the centuries old Jones Act that prevents internationally owned shipping firms from working in US domestic routes to speed up supplies and reduce costs.

The IEA has also tried to come what it's calling the “largest supply disruption in the history” by releasing an all-time record 400mn barrels of oil from strategic reserves around the world. However these attempts to reduce an increasing sense of panic, made worse by Israel's attack on Qatar’s South Pars gas complex on  having little effect as the US makes little progress in defeating Iran in Operation Epic Fury.

The Iran oil sanctions decision follows nearly three weeks of US and Israeli strikes on Iran raising concerns within the White House about the impact on domestic inflation ahead of November midterm elections. Oil prices have risen about 50% since the start of hostilities on February 28. The cost of diesel at the pump in the US has hit $5 per gallon and that of petrol is just under $4 at the time of writing.

The Iran oil licence permits imports into the US where necessary to complete delivery, although imports of Iranian oil have been next to zero since sanctions were reimposed following the 1979 revolution. The biggest impact will be felt in Asia which is heavily dependent on imports from the Gulf.

Energy Secretary Chris Wright said shipments could reach Asian markets within days, with refined products entering circulation over the following weeks.

The Iranian Revolutionary Guard Corps (IRGC) closed the strait on March 2, but since then traffic has partially resumed thanks to an informal permits-for-passage system that allows some tankers from “friendly countries” to transit the strait. Iranian oil exports have continued since the start of the conflict unimpeded. An estimated 3mn b/d are being exported via the straits under the new system with another 4-6.5mn b/d exported by the Kingdom of Saudi Arabia (KSA) via its westward pipelines that terminate at the port of Yanbu on the Red Sea. Together these exports have acted as a significant cushion from the conflict’s oil shocks. That could change quickly after Yemen’s Houthi rebels declared they will join the war on Iran’s side on March 21 and could close the Bab al-Mandab Strait that command the entrance to the Red Sea.