US-Iran Conflict Drives Oil Prices Above $96 as Strait of Hormuz Crisis Deepens

The conflict between the US and Iran has escalated into a struggle for control of oil shipping lines, which is as vital as military might. The recent flare-up has been caused by missiles fired by Iran against an American aircraft carrier and destroyer close to the Strait of Hormuz, following which three oil tankers belonging to Iran were attacked by America.

The Strait of Hormuz is a crucial waterway through which 20 million barrels of oil are pumped each day, accounting for about 20% of world oil reserves. The mere possibility of interruption can be significant in this case, and Iran's ability to blackmail shippers is economically significant for the Iranians.

Shipping traffic has fallen sharply, with only six ships passing through the straits on Wednesday, 11 ships on Tuesday, and five ships on Monday, averaging just 13 ships per day over the last 10 days. US officials have said that millions of barrels are still passing through the waterways, but the difference in statements indicates the level of uncertainty associated with oil flows.

Brent crude oil prices have risen to $96.28 per barrel from around $70 per barrel before the conflict, an increase of 37%. The main risk is that of escalating retaliation, which could push the price of Brent above $100 if another tanker attack occurs or if port closure disrupts supplies.