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Oil jumps on Hormuz
Oil prices surged at the start of the week after fresh military exchanges between the United States and Iran reignited fears over the security of the Strait of Hormuz, a critical energy shipping route.
Brent crude traded above $79 per barrel while U.S. West Texas Intermediate (WTI) hovered near $74, extending gains after last week’s rally, as uncertainty grew over whether commercial vessels could continue transiting the waterway.
Iranian officials announced that the waterway had been closed “until further notice,” while U.S. Central Command (CENTCOM) rejected the claim, insisting coalition forces are continuing operations to safeguard freedom of navigation.
The escalation followed another round of U.S. military strikes targeting Iranian assets after Tehran allegedly launched attacks on a Cyprus-flagged container ship, and CENTCOM said the operation was intended to protect commercial shipping.
Strikes, mines, and markets
Oil prices rose more than 3% on Monday after Iran and the U.S. traded strikes and Israel ordered troops to move further into Lebanon in its battle with Tehran-backed Hezbollah, with Brent futures up $2.68 or 3% at $93.80 a barrel at 1121 GMT.
U.S. President Donald Trump said on Friday he would soon decide on a proposed deal to extend a ceasefire announced in early April, while the U.S. proposed a “gradual de-escalation” plan, a U.S. official said on Sunday.
Concerns are rising about mines in the Strait of Hormuz, a key oil and gas shipping lane, and IG analyst Tony Sycamore said in a note, “Even if an agreement is reached, it won’t deliver a flood of supply.”
In a separate market read, Goldman Sachs flagged weak oil demand in China and Europe as a major downside risk to its fourth-quarter Brent crude forecast of $90 a barrel and WTI forecast of $83, even as Middle East supply disruptions could still push prices higher.
Traffic slows, risk premium
Maritime traffic in the Strait of Hormuz declined sharply amid renewed fighting, with just six vessels tracked crossing the strait between 18:00 GMT on Thursday and 06:00 GMT on Friday, compared with 18-22 daily crossings earlier this month.
“Oil prices have jumped amid the latest outbreak of hostilities between the United States and Iran over the Strait of Hormuz”
Al Jazeera reported that Brent futures for September delivery stood at $78.82 a barrel as of 08:00 GMT, the highest since June 22, while CENTCOM said on Sunday that it had carried out dozens of strikes on Iran to degrade its ability to attack vessels in the strait.
Mukesh Sahdev, founder and chief oil analyst at XAnalysts in Sydney, Australia, said he expects the per-barrel price of Brent to remain in the upper $70s during August and September amid heightened geopolitical uncertainty, adding, “There could be occasional spikes and dips outside that range.”
The same report said oil prices had returned to pre-conflict levels after a memorandum of understanding signed on June 17, but were now about 9 percent higher than before the U.S. and Israel launched their initial strikes on Iran in late February.
