Oil Market Prices in Prolonged Hormuz Crisis

The oil market is adapting to the prolonged Hormuz crisis, pricing in disruptions to Middle East energy supplies as a new reality.

Nearly six months after the US attack on Iran, hopes for a diplomatic breakthrough have faded, and an interim ceasefire agreed on June 17 has collapsed.

Iran warned it would escalate tensions unless Washington fully implemented the interim peace deal within weeks. An Iranian official told Reuters that if diplomacy failed, Tehran would launch a timely and precise attack to break the US naval blockade.

The market may no longer fear an immediate collapse in supplies but neither does it expect a swift return to normal, with crude oil prices stabilizing around $90 a barrel, roughly 50% higher than at the start of the year.