Oil Prices Soar as US-Iran Tensions Escalate in Gulf

Oil prices rose sharply this week as tensions between the US and Iran continued to escalate in the Gulf. The Strait of Hormuz, a critical shipping lane, has been reopened after being closed for a month due to the conflict. Overnight US strikes hit Iranian rocket launchers on Larak Island, prompting Tehran to respond with claims of missile and drone strikes on US bases in Jordan and the UAE.

The US Treasury Secretary, Bessent, stated that the US would impose additional Iran secondary sanctions every week, starting with banks. This move is part of the US's efforts to curb Iran's ability to fund its military activities. The Strait of Hormuz was closed for a month due to the conflict, but commercial transits have remained a fraction of the pre-war levels, around 130 vessels per day.

Despite the tensions, Brent crude prices rose by over 2% to around $90.50, while WTI prices increased by more than 2% to near $85.50. The conflict has also had an impact on global refining capacity, which is still roughly 10% impaired from combined Gulf damage and Ukrainian strikes on Russian plants.