Oil markets are experiencing significant volatility after Iran declared the Strait of Hormuz closed following a strike on a Cyprus-flagged container ship, the MV GFS Galaxy. Brent crude briefly touched $80 a barrel, an 8% jump, before settling near $76. These events have led to a dramatic increase in war-risk insurance premiums for tankers transiting the Gulf, now at approximately 5% of a vessel's value, a significant rise from the pre-conflict 0.15% and the highest level since the ceasefire.
Tanker traffic through the Strait of Hormuz has plummeted from over 70 daily transits to as few as a dozen. Shipping data showed a decline from 49 crossings on July 7 to 22 on July 9, with the Omani route seeing a significant reduction. Despite Iran's closure declaration, US President Donald Trump stated the strait remains open to commercial traffic. The US Central Command also reported assisting the passage of more than 800 vessels and 400 million barrels of crude since early May, emphasizing continued commercial transits.
These escalations follow an Iranian strike on the MV GFS Galaxy, which occurred about 16.5km off Oman, causing significant engine-room damage and a fire, with one crew member missing. In response, the US launched three rounds of airstrikes this week, hitting over 300 Iranian military targets. Iran subsequently retaliated by striking Jordan, Qatar, Oman, and the UAE with missiles and drones, while Saudi Arabia and Kuwait condemned these actions, accusing Tehran of violating international law. The Strait of Hormuz, a critical chokepoint for about 20% of global oil and natural gas, faces severe disruption, causing concerns about global energy markets and highlighting the fragility of a potential peace deal between the US and Iran.
