Oil prices have surged to their highest level in a month as renewed hostilities between the United States and Iran continued for a third consecutive day, dampening hopes for a return to normality in the Strait of Hormuz. This volatile situation has sent shockwaves through the global oil market, with Brent crude rising 2 percent on Tuesday and extending a 9.6 percent gain from the previous day. The primary international benchmark, Brent futures for September delivery, stood at $84.91 a barrel as of 03:30 GMT, the highest since June 15. This dramatic increase comes after easing to pre-conflict levels following Washington and Tehran’s signing of a memorandum of understanding (MoU) for peace last month. However, the recent escalation has reversed this trend, with oil prices rising about 17 percent from their price before the start of the US-Iran war in late February. The US Central Command announced a third day of strikes on Iran, targeting Tehran’s ability to attack “innocent civilians and commercial shipping” in the Strait of Hormuz. Iran’s Islamic Revolutionary Guard Corps responded by attacking two oil supertankers in the strait and launching missile and drone strikes against US military assets in Kuwait and Bahrain. Adding to the market volatility, US President Donald Trump threatened to reimpose a blockade of Iranian ports and charge transit fees, further escalating tensions. The oil market has proven resilient through this crisis, thanks to an ample stock cushion. However, this cushion is now depleted, leaving the market vulnerable to a rerun of March and April. The Trump administration has sought to assure markets that the strait remains open to shipping, despite Iran’s declaration that the waterway is closed “until further notice”. The US Department of Energy reported that 8.5 million barrels of oil passed through the strait the previous day with the assistance of the US military, describing the flow as “consistent with the recent average”. However, traffic in the Strait of Hormuz has plummeted amid the renewed threat of violence against commercial shipping, with only 57 transits recorded from Friday through Sunday, a more than 50 percent drop compared with the previous week. Before the US and Israel launched their initial strikes on Iran in late February, roughly 130 vessels transited the strait daily. This dramatic reduction in traffic has raised concerns about the potential impact on global oil supplies and prices. Bart Melek, global head of commodity strategy at TD Securities in Toronto, Canada, predicts that oil prices are likely to rise again substantially amid the resumption of US-Iran hostilities. He suspects that a move to $100 is quite possible, should it become apparent that physical shortage risks are real and increasingly likely. This volatile situation has sent shockwaves through the global oil market, and the future of oil prices remains uncertain as tensions between the US and Iran continue to escalate.
