Hormuz Risk Premium Rebuilds After Deal Talks Collapse

Oil traders have repriced the risk of disruptions to the Strait of Hormuz after a deal on re-opening the waterway fell apart. The price of September WTI crude oil futures has risen by $4.11, or 5.33%, for the week.

The rally was not driven by a new supply loss, but rather by traders rebuilding the risk premium that had been stripped out earlier in the week. This premium reflects the market's view of the likelihood and impact of disruptions to oil supplies through the Hormuz Strait.

Before the conflict, over 125 vessels per day moved through the waterway, making it a critical chokepoint for global oil supplies. While tanker traffic has been restricted, the Red Sea is not seen as a reliable alternative.