Iran Considers Strait of Hormuz Ban, Crude Oil Futures Soar

Crude oil futures surged on August 6 after a report emerged that Iran is considering legislation to ban vessels from 'hostile' nations, including the US and Israel, from transiting the Strait of Hormuz.

The draft bill reportedly calls for a complete ban on US and Israeli vessels, with provisions allowing passage by ships from other hostile nations conditional on payment of compensation. The legislation also includes clauses imposing fines of up to 20% of the value of cargo carried on vessels that violate the regulations.

As a result of the renewed tensions, international benchmark Brent crude futures rose $3.04, or 3.83%, to $82.49 per barrel, while US West Texas Intermediate (WTI) futures for September delivery settled $2.07, or 2.75%, higher at $77.29 per barrel.

According to Michael Lynch of Strategic Energy and Economic Research, the rift between the US and Iran over the Strait remains deep, while Dennis Kissler, Senior Vice President of Trading at BOK Financial, noted that crude traders remain focused on a US-Iran deal, with prices swinging to the upside due to the delay in negotiations.