Oil prices surged on Monday following a weekend of escalating tensions and attacks between the United States and Iran, particularly concerning the Strait of Hormuz. Brent crude, the international benchmark, rose more than 3-4%, reaching prices between $78.35 and $79.26 a barrel, the highest since late June. The US benchmark, West Texas Intermediate (WTI), also saw increases of over 3-4%, trading around $73.62 to $74.50 a barrel. This jump reflects renewed fears of disruptions to global oil supply, as the Strait of Hormuz is a critical waterway for approximately one-fifth of the world's oil trade.
The escalations began after the US conducted strikes on Iran, accusing Iranian forces of attacking the MV GFS Galaxy, a Cyprus-flagged container ship, in the Strait of Hormuz. Iran retaliated with missile and drone attacks against countries including the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain, and also claimed to have struck US military bases in the region. The US Central Command (CENTCOM) confirmed dozens of strikes on Iran to degrade its ability to attack vessels and insisted the Strait of Hormuz remains open for commercial shipping, despite Iran's conflicting claims.
This renewed fighting casts significant doubt on the interim US-Iran agreement signed in June, which had aimed to end the conflict and facilitate the reopening of the strait. Oil prices had previously returned to pre-conflict levels after this agreement. However, analysts like Fabien Yip from IG in Sydney noted that the latest re-escalation exposes the fragility of that assumption, though he anticipates prices are unlikely to reach the much higher levels seen earlier in the war, partly because demand remains slow to recover and supply from OPEC+ and stranded-tanker releases continue to add barrels. Mukesh Sahdev of XAnalysts expects Brent prices to stay in the upper $70s during August and September, with occasional spikes.
The volatile situation has also impacted maritime traffic, with fewer vessels transiting the strait. Windward, a maritime intelligence platform, reported that only six vessels crossed the strait between Thursday evening and Friday morning, significantly down from the 18-22 daily crossings earlier in the month. Kpler data also showed only six vessels transiting the strait on Sunday, the lowest in five weeks. This stark reduction in traffic underscores the immediate impact of the heightened geopolitical uncertainty on global trade and energy markets.
