Strategic oil release may calm markets but cannot fix Hormuz disruption
Key Takeaways
- Iran has effectively closed the Strait of Hormuz, leaving hundreds of tankers idle.
- Oil prices exceed $100 per barrel and tanker traffic plunged after attacks on Tehran.
- A strategic oil release may calm markets but cannot restore Hormuz transit.
Hormuz disruption price spike
Hundreds of tankers sit idle on both sides of the Strait of Hormuz as Iran has effectively closed the waterway, pushing oil prices above $100 – the highest since 2022, after the start of the Russia-Ukraine war.
“Hundreds of tankers sit idle on both sides of the Strait of Hormuz as Iran has effectively closed the waterway, pushing oil prices above $100 – the highest since 2022, after the start of the Russia-Ukraine war”
Tankers halt, global risk
Oil tanker traffic in the strait, through which one-fifth of global oil passes, has plunged after Israel and the United States launched attacks on Tehran on February 28.
Asian countries, including India, China and Japan, as well as some European countries, source large portions of their energy needs from the Gulf.
A disruption in supply will rattle the global economy.
IEA drawdown and impact
With an aim to cushion from the shock, the International Energy Agency (IEA) has decided to release 400 million barrels of oil from emergency reserves, the largest coordinated drawdown in the agency’s history.
“Hundreds of tankers sit idle on both sides of the Strait of Hormuz as Iran has effectively closed the waterway, pushing oil prices above $100 – the highest since 2022, after the start of the Russia-Ukraine war”
But it has failed to push the prices down.
Oil price trajectory
Oil prices reflect those anxieties.
Brent crude ended trading on Friday at $103.14 per barrel, after surging to nearly $120 earlier as fears of disrupted production and shipping intensified.