Oil prices surged to a one-month high amid escalating attacks in the Strait of Hormuz
Oil prices rose nearly 3% on Tuesday to a four-week high as uncertainty over energy flows increased following the US reimposition of a naval blockade against Iran and increased attacks between the two countries in the Strait of Hormuz. Data showed that the number of tankers passing through the Strait of Hormuz fell to its lowest level in two months.
Brent crude futures rose $1.90, or 2.3%, to $85.20 a barrel at 06:30 GMT, while WTI crude rose $1.91, or 2.4%, to $80.05 a barrel.
Both Brent and WTI were up about 3% in early trading.
Both contracts gave back some of their gains after previously rising more than $2 a barrel; Brent, meanwhile, saw its biggest daily increase since May 2020, rising 9.6% in the previous session.
Oil prices are at their highest level since the two countries signed a memorandum of understanding on June 17 to end the war.
Trump reimposed a blockade on Iranian ships and raised the possibility of demanding a 20% fee to protect the Strait of Hormuz. The US military launched a third consecutive night of strikes against Iran on Monday.
The recent escalation, including the US reimposition of the blockade and Iran's responses, has clearly added a new risk premium to the market.
While a complete shutdown hasn't occurred, the targets and actions of both sides have made the supply picture highly uncertain.
The United Arab Emirates Ministry of Defense announced on Monday that two Iranian cruise missiles struck UAE tankers in Omani waters in the southern lane of the Strait of Hormuz, killing one Indian crew member and injuring eight others.
Shipping data released on Monday also showed that the number of tankers passing through the Strait of Hormuz fell to its lowest level in two months.
Any significant bottleneck in tanker traffic, a prolonged decrease in ship movements, or disruptions in export flows would likely trigger another surge in oil prices. Conversely, if supply flows continue despite military tensions, some of the current geopolitical premium could gradually diminish.
Meanwhile, the Houthis in Yemen launched a missile attack on Saudi Arabia on Monday, claiming the kingdom had bombed an airport under its control. If the Houthis extend their attacks to Saudi crude oil products in the Red Sea, it could bring further uncertainty to crude oil flows from the region.
In the meantime, according to a preliminary poll, US crude oil inventories were expected to fall last week, while gasoline and distillate fuel inventories were likely to increase.
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