Oil Prices Surge on US Threat to Blockade Iran

Oil prices have risen in response to the United States' threat of an indefinite naval blockade of Iran, which is likely to disrupt crude supplies from the Middle East. According to Reuters, Brent futures are up $1.43 or 1.64% at $88.50 a barrel, while US West Texas Intermediate crude futures are up $1.56 or 1.92% at $82.81 a barrel.

Bjarne Schieldrop at SEB Research noted that higher oil prices are 'a natural result' of the US approach, implying a substantial extension of trouble in the Middle East with little hope of near-term resolution. The latest US threats come as Iran curbs flows through the Strait of Hormuz, which handled about one-fifth of global daily oil and liquefied natural gas supplies before the conflict began in late February.

A recent attack on two Abu Dhabi National Oil Company vessels transiting the strait has further complicated the situation. The UAE government condemned the incident as an Iranian attack. Forecasts from OPEC and the International Energy Agency pointed to weaker demand growth, while US crude inventories posted their largest weekly increase in more than 3-1/2 years.