Oil Prices Rise on Strait of Hormuz Restrictions

Oil prices rose on concerns over Iran's plan to restrict oil shipments through the Strait of Hormuz, where about a fifth of the world's oil and liquefied natural gas is transmitted. Brent crude futures increased by $0.80 or 0.97%, reaching $83.29 per barrel, while US West Texas Intermediate futures rose by $0.64 or 0.83%, to $77.93.

Iran has proposed a bill that would ban US and Israeli vessels from the Strait of Hormuz and fine violators up to 20% of cargo value. Oman is discussing fees of around 3%, while Washington wants no fees at all. However, four industry sources said the proposed deal is not easily workable due to US sanctions and restrictive insurance clauses.

Lin Ye, vice president of commodities market, oil at consultancy Rystad Energy, said that the proximate trigger for oil prices reacting to Iran's published draft plan is its ban on 'hostile' countries. Analysts also believe that the hostilities between Iran and the US are not yet over.