Oil prices rise amid uncertainty over Iran war and Strait of Hormuz shipping

Oil prices opened higher on Sunday (15) as markets reacted to uncertainty over navigation through the Strait of Hormuz, off Iran’s coast, and doubts about a potential agreement between the United States and Iran to end the conflict.

The Brent crude benchmark surged as much as 3.3% at the start of trading, briefly rising above $106 per barrel. The move later stabilized around 9:30 p.m., with Brent up 0.05% at $103, a level it maintained through 7:40 a.m. Monday.

The commodity had already crossed the $100 mark on Thursday (12) and closed at $103.82 on Friday (13), as fears of a prolonged disruption in energy markets dominated trading desks.

The price swings follow a series of statements over the weekend by U.S. and Iranian officials regarding the conflict.

On Saturday (14), Iran’s foreign minister Abbas Araghchi said the Strait of Hormuz remains open to all vessels — except those belonging to U.S. allies.

U.S. officials, responding to economic uncertainty caused by rising oil prices, said on Sunday that the war could end within weeks and would likely be followed by a decline in energy costs. Iran, however, said it remains stable, strong and ready to defend itself.

President Donald Trump threatened to repeat attacks on Kharg Island, Iran’s main oil export hub, over the weekend and said he was not ready to negotiate an agreement to end the war, which has disrupted navigation through the Strait of Hormuz and shaken global markets.

The narrow maritime corridor between Iran and Oman is a key artery for global energy markets. Around 20% of the world’s traded oil and liquefied natural gas passes through the strait. Since the start of the conflict, oil prices have risen about 40%, while global stock markets have fallen roughly 5%.

Araghchi told Iranian state media that the passage is blocked “only to tankers and ships belonging to enemies and their allies.”

“Other ships have free passage but may choose to divert for safety reasons,” he said.

“There are still many tankers and vessels passing through the strait,” the minister added.

The Trump administration is expected to announce this week that several countries have agreed to form a coalition to escort ships through the waterway. According to the Wall Street Journal, discussions are ongoing about whether those operations would begin before or after hostilities end.

Iran’s ability to disrupt shipping in the strait has increased pressure on the United States and allied countries due to the potential impact on global energy markets. A prolonged disruption to oil supply and production could push prices toward levels seen during previous supply shocks, such as the Ukraine war or even the 2008 financial crisis.

Fewer than 80 vessels have crossed the strait since the start of the conflict, according to data from British maritime intelligence firm Lloyd’s List Intelligence. During the same period last year, 1,229 transits were recorded, representing a 93.7% decline.

During a period of heightened volatility last week, oil prices briefly reached $120 per barrel, the highest level in four years, before falling back to around $90 and stabilizing above $100 on Friday. Analysts expect prices to continue rising if the conflict in Iran drags on.

Amid concerns over the potential economic consequences — including renewed inflation driven by higher fuel prices — several countries have begun diplomatic and logistical efforts to stabilize markets.

Trump on Saturday urged other nations to deploy warships to keep the Strait of Hormuz open, naming China, France, Japan, the United Kingdom and South Korea as potential partners in the effort.

From a logistics standpoint, the International Energy Agency (IEA) said Sunday it will begin releasing oil from emergency reserves, with member countries pledging to make 411.9 million barrels available.

Of that total, 271.7 million barrels will come from government stocks, 116.6 million barrels from mandatory industry reserves and 23.6 million barrels from other sources. The agency said 72% of the planned release will be crude oil, with the remaining 28% refined products.

Stockpiles in Asia and Oceania will be available immediately, while reserves in Europe and the Americas will become available by the end of March.

So far, the measure has had no immediate impact on prices. Analysts view the move largely as a temporary relief measure.

“In trading-desk terms, the IEA release is like pointing a garden hose at a refinery fire,” said Stephen Innes of SPI Asset Management.

Analysts at Macquarie estimate the proposed release equals roughly four days of global oil production and 16 days of the volume of oil that normally transits the Persian Gulf.

Source: Folha de São Paulo

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