Oil climbed to a four-week high on Tuesday after the U.S. reimposed a naval blockade of Iran and renewed strikes revived fears over the Strait of Hormuz. Brent rose 3.47% to $86.19 a barrel and WTI gained 1.96% to $79.67, still short of the $110-plus levels reached earlier in the war.
Renewed hostilities between Washington and Tehran pushed oil to its highest in four weeks, as traders priced the risk that energy flows through the Strait of Hormuz could be choked off. Brent crude rose $2.89, or 3.47%, to $86.19 a barrel, while WTI, the American standard, gained $1.53, or 1.96%, to $79.67. Both marked their highest levels since mid-June, before the U.S. and Iran signed a memorandum of understanding to end the conflict on June 17.
What pushed prices up
The move followed the reimposed U.S. blockade of Iranian shipping and a proposal to charge a 20% fee to guard the waterway. That artery carried about a fifth of the world's daily oil and liquefied natural gas supplies before the conflict began, which makes any disruption there a direct threat to global supply.
Tensions sharpened on the water. Two Emirati tankers were struck by Iranian cruise missiles in the strait, killing one Indian crew member and wounding eight others, according to the United Arab Emirates Ministry of Defence. Shipping data on Monday showed the number of tankers transiting the strait fell to the lowest level in two months.
A reversal on the transit fee
President Trump then stepped back from the levy, saying he would replace the 20% fee with trade and investment deals that Gulf states would make with the U.S., without naming the countries involved. Market participants worry that a Hormuz fee could set a precedent, with similar charges emerging elsewhere and raising inflation while hurting maritime trade.
Where the range sits
The rally leaves crude above the low-$70 range of recent weeks but below the highs above $110 seen earlier in the war. ANZ analyst Soni Kumari said the peak of the escalation may be behind the market, according to Radio-Canada: “there are upside risks to oil prices if these disruptions continue”. Citi noted that the odds of Iran walking away from the memorandum until after the U.S. midterm elections have risen, a scenario that would most likely keep prices higher for longer. Traders eyeing the move can follow it on the oil market.
Sources: Radio-Canada, FXEmpire
Trading involves risk.
Risk Disclaimer
