The conflict between the US and Iran has intensified, directly impacting the oil market. Over the past week, the US has struck Iran for five consecutive days, including hitting a sanctioned oil tanker near Iran's main export terminal. In response, Iran fired upon American bases in Kuwait and Jordan, with Jordan intercepting eight missiles. These escalating tensions have led to a sharp decline in shipping traffic through the Strait of Hormuz, a crucial chokepoint for oil and liquefied natural gas.
The renewed hostilities have curtailed oil flows in the region. The seven-day average of oil transits through Hormuz has dropped from 4.6 million barrels to 3.9 million barrels. Preliminary data from maritime intelligence firms indicate that daily crossings have fallen drastically, from a pre-conflict average of 138 per day to as few as 11 tankers and cargo vessels on Wednesday. This disruption has prompted some shippers to turn off their location devices or simply stay put, although a growing amount of energy is being rerouted through pipelines.
These developments have pushed up global oil prices. Brent crude oil, despite a slight dip on Thursday, is up 11% this week to around $84.50 a barrel, after trading above $85 a barrel. This price increases from around $84.50 previously and is a significant rise from before the recent escalation. The US frustration over Iran's attacks on vessels, coupled with its re-imposition of a blockade on Iranian ports and the end of a waiver on oil sanctions, signals a hardening stance. Iran, however, appears determined to assert its authority over the Strait, demanding permission and potentially fees for passage.
Prior to the current blockade, which was reimposed after being lifted in a June 17 ceasefire deal, Iran had exported an estimated 74 million barrels of oil, valued at over $6 billion. During this period, Iran was selling oil at prices roughly 20% higher than before the war. The White House is now considering extending a shipping waiver to ease supply disruptions for oil, fuel, and fertilizer. RBC Capital Markets analysts note that the "ceasefire is over" and do not expect Hormuz traffic to return to pre-war levels given the persistent threat of mines, missiles, drones, and "Tehran tolls."
