Oil prices surged following a new outbreak of conflict between the United States and Iran regarding the Strait of Hormuz. Brent crude, the international benchmark, saw a rise of over 4% to $79.26 a barrel, the highest since June 22. US-traded oil also increased by 4.3% to $74.50. This comes after an interim agreement between Washington and Tehran, signed last month, had seen oil prices return to pre-conflict levels, around $75 a barrel.
The renewed hostilities involve the US Central Command (CENTCOM) carrying out dozens of strikes on Iran to degrade its ability to attack vessels in the strait, following accusations that Iranian forces attacked a Cyprus-flagged container ship, the MV GFS Galaxy. In retaliation, Iran launched missile and drone attacks against the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain. Iran's Persian Gulf Strait Authority continues to claim the right to control traffic through the strait, while CENTCOM asserts that Iran does not control the vital waterway for global trade.
Market analysts, such as Fabien Yip from IG, note that while the risk premium will keep prices supported, a repeat of earlier, higher spikes (over $120 a barrel) is unlikely due to slow demand recovery and an oversupplied outlook from OPEC+ output and stranded-tanker releases. Mukesh Sahdev of XAnalysts expects Brent crude to remain in the upper $70s during August and September, with potential for occasional spikes and dips. The recent escalation has significantly reduced maritime traffic in the Strait of Hormuz, with only six vessels tracked between 18:00 GMT Thursday and 06:00 GMT Friday, compared to 18-22 daily crossings earlier in the month, and about 130 vessels in peacetime.
