Key Takeaways
- Oil prices rose more than three percent after renewed military strikes between the United States and Iran.
- The Strait of Hormuz, through which 20% of global oil passes, remains a focal point of tension.
- US President Donald Trump stated that the strait is open to commercial traffic despite Iranian claims.
Oil prices surged more than three percent on Monday after renewed military strikes between the United States and Iran reignited concerns over energy shipments through the Strait of Hormuz. Brent crude futures were up $2.47, or 3.25%, to $78.48 at 4:45pm PKT, while US West Texas Intermediate crude was up $2.35, or 3.29%, to $73.76 a barrel.
The escalating conflict has cast further doubt on the future of an interim US-Iranian agreement signed last month that aimed to reopen the strait and end the war after a further 60 days of negotiations. Following the agreement, global oil supply rose by 4.1 million barrels per day in June but remained 9.4 million barrels per day below pre-war levels, according to the International Energy Agency’s monthly report.
Tehran targeted US facilities across the Gulf on Sunday and said it had again closed the Strait of Hormuz. Iran’s Revolutionary Guards claimed they had attacked US military bases in Kuwait and Bahrain. Some 20% of the world’s oil and liquefied natural gas transited the strait before the war began at the end of February.
Shipping operators are adopting a cautious approach, with inbound movements slowing under heightening security concerns. Vessel traffic through the strait fell to a five-week low on Sunday, according to ship-tracking data from Kpler. Six vessels transited the strait on that day.
The escalating attacks have cast further doubt on the future of an interim US-Iranian agreement signed last month that aimed to reopen the strait and end the war after a further 60 days of negotiations. Following the agreement, global oil supply rose by 4.1 million barrels per day in June but remained 9.4 million barrels per day below pre-war levels, according to the International Energy Agency’s monthly report.
US President Donald Trump said on Sunday that the Strait of Hormuz was open to commercial traffic, although Iran declared earlier that it had closed the strait after a vessel had travelled on an unapproved route and was struck. Goldman Sachs estimated that expanding pipeline capacity in the Middle East could shield more than 60% of pre-war Gulf oil exports from any future Hormuz disruptions by end-2028.
Iranian oil supplies held at sea are rising after Tehran boosted exports during the interim peace deal with the US. However, sales have been slow as China’s independent refiners have turned to cheaper crude from Iraq, the UAE and Qatar. The Abu Dhabi National Oil Company (Adnoc) set the August official selling price of its benchmark Murban crude at $80.01 a barrel, down from $101.48 a barrel the month before.
Elsewhere in the region, Ukraine’s Security Service said it struck an oil depot in Russia’s Stavropol region overnight, as well as three storage tanks at an oil-loading site in the port of Kavkaz in the southern Russian region of Krasnodar.
