WTI Oil Prices Surge $3.50 as Market Realizes Strait of Hormuz Terms

The price of WTI crude oil surged by $3.50 in just four hours on Tuesday, reversing its earlier decline after a news headline caused market confusion.

The news reported that Iran and Oman had announced a temporary joint maritime corridor through the Strait of Hormuz with mine clearance attached. However, upon closer inspection, it was revealed that this 'corridor' is actually a permission-and-payment regime controlled by Tehran, with reported charges ranging from $1 million to $2 million per voyage.

The transit count has actually decreased since August 22, with vessels crossing the strait declining from as many as 20 inbound and 14 outbound to just four inbound and none outbound. This reduction in physical flow is significant, particularly for China-bound oil shipments, which account for approximately 65% of crude exports through the strait.

The market's initial reaction was to sell the news story, with prices dropping by around 6% over three sessions. However, upon realizing that the terms were not as favorable as initially reported, buyers returned, causing prices to rebound.