Oil is trading above $110 a barrel again, reaching five-month highs, as investors grow increasingly concerned about potential new Iranian action in the Strait of Hormuz — the critical maritime chokepoint through which roughly one-fifth of the world’s oil and natural gas supply passes.
On Tuesday, Brent crude futures gained to $110.10, after reaching $110.70 on Monday, their highest since May 20, according to Invezz. US West Texas Intermediate for November delivery rose to $103.91, while the more actively traded December contract climbed to $98.93. WTI front-month contracts have risen for nine consecutive sessions, putting them on track for a monthly gain of almost 20%.
Ship tracker Kpler recorded fire on at least 18 ships during the fortnight to October 20, with assaults on commercial shipping in the waterway intensifying. Iran’s Revolutionary Guard Corps stated on October 20 that two oil tankers it described as “non-compliant” had been set ablaze in the strait after striking mines laid by its naval unit, according to Iranian state-affiliated news agency Tasnim.
Iran’s warning
Iranian Vice-President Reza Aref stated that the country has “no other choice” but to secure control of the Strait of Hormuz to safeguard its national security, according to the state-run IRNA news agency. He squarely blamed the United States for the current situation, declaring that “the US is responsible for the current situation and must pay the price for it.”
Iran’s Foreign Ministry spokesperson Esmaeil Baqaei also said Tehran would respond to any American strike “in equal measure, if not more forcefully,” Tasnim reported. Despite the escalating tensions, Washington has asserted that crude oil flows through the Persian Gulf have recovered to 80% of pre-war levels.
Risk premium rising
“The risks to oil prices are clearly tilted to the upside,” said Hamad Hussain, commodities economist at Capital Economics, as quoted by Bloomberg. The analyst warned that the intensification of attacks on vessels raises the risk of a “fresh drop in oil supply and a continued rise in prices.” Brent has jumped by over 56% from its lowest level in July this year.
Traders said the combined threat to two major crude-producing regions — the Middle East and Russia, where Ukraine has vowed fresh long-range strikes on refineries — was pushing up risk premiums across energy markets, with several banks lifting their near-term price forecasts.
