Hormuz Conflict Drives Crude Prices to New Highs
Crude oil prices surged on Monday, with Brent reaching its highest level since July and WTI holding above $92 per barrel. The catalyst for this price increase was the ongoing conflict in the Strait of Hormuz, where Iranian oil tankers have been targeted by the US Navy. In response, Iran has threatened to introduce a restricted maritime zone beyond the strait, which could further disrupt global oil supplies.
The market is pricing a physical shortage rather than a geopolitical premium, with traders focusing on the decline in tanker traffic through Hormuz and the low levels of commercial crude inventories. This has led to a significant price increase, with Brent up 7.6% last week and WTI advancing close to 10%. The US Energy Secretary confirmed that the blockade on Iranian exports will continue alongside escort operations for commercial vessels.
The EIA's estimates suggest that Middle East shut-in crude production due to Hormuz transits is expected to continue through 2027, with ongoing disruptions of about 0.6 million barrels per day. If transits keep falling through September, the market may see further price increases.