Oil Prices Surge Amid Ongoing Tensions in Strait of Hormuz
Oil prices closed higher on Friday, July 31, as concerns over global crude flows mounted due to reports that some tankers were forced to turn back in the Strait of Hormuz. Brent futures settled up $1.09, or 1.2%, at $90.12 a barrel, while US West Texas Intermediate (WTI) futures closed up $1.08, or 1.3%, at $84.67 a barrel.
The war in Iran has sharply curtailed traffic through the Strait of Hormuz, a vital chokepoint that previously carried about a fifth of global crude oil and natural gas supplies. The disruption has disrupted millions of barrels per day of Middle East output.
Ole Hvalbye, market analyst at SEB Research, noted that 'the market has stopped trading the war and started trading the shipping data.'
Despite ongoing talks between Iran and Oman on managing the strait, geopolitical risks remain. A report from Gelber & Associates stated that the 'geopolitical risk premium remains firmly in place near chokepoints like the Strait of Hormuz.'