Oil prices surged on July 13 as the conflict between Iran and the United States intensified over the Strait of Hormuz, a crucial shipping lane. Brent crude futures climbed by $2.34, or 3.08%, reaching $78.35 by 2311 GMT. US West Texas Intermediate (WTI) crude also saw a significant increase, rising $2.21, or 3.09%, to $73.62 a barrel. This escalation followed an Iranian attack on a Cyprus-flagged commercial ship in the waterway, which forced its crew to abandon the vessel after it caught fire and left one Indian sailor missing.
Iran's Revolutionary Guards declared the Strait of Hormuz closed until further notice, citing American interventions in the region. However, the US military's Central Command countered this, asserting that the strait remained open to all lawful vessels and that US forces were prepared to ensure freedom of navigation. Despite these assurances, shipping traffic through the strait, which normally carries about a fifth of the world's oil and natural gas supplies, saw significant reductions. Kpler data showed transits falling from over 70 daily before the war to as few as a dozen, with observability on the southern Omani route reduced to a single crossing on some days. War-risk insurance premiums for tankers transiting the Gulf escalated dramatically to 5% of a vessel's value, a substantial increase from 0.15% before the conflict.
The conflict further escalated with fresh attacks on July 12. Iran reported strikes on two of its southern islands, while Kuwait announced that three of its land border posts and an offshore oil platform had been targeted, resulting in one injury. These attacks came hours after a third exchange of fire between Tehran and Washington this week, with control of Hormuz remaining the central contentious issue. Oman, which rescued 23 crew members from the attacked commercial ship, summoned the Iranian ambassador to protest the strikes, labeling Iran's actions as "irresponsible."
Earlier in the week, Brent crude briefly touched $80 a barrel before settling near $76. The US military responded to the Iranian attack on the commercial ship by launching several waves of strikes on Iran, hitting approximately 140 targets including missile and drone launch sites, and ammunition dumps. Iran, in turn, attacked Bahrain, Kuwait, Qatar, Jordan, and Oman. The escalating violence threatens to collapse ongoing negotiations between Tehran and Washington aimed at ending the Middle East war, with the interim deal nearing its midpoint of the 60-day period.
