Hormuz Tensions Boost Oil, Global Impact on Inflation in the Spotlight
Oil prices rose sharply on Monday (April 20) after an escalation in the Strait of Hormuz escalated geopolitical risk premiums. The May WTI contract surged nearly 7% to $89.53 per barrel, while the June Brent contract rose 6.2% to $96.05 in early US trading.
The rise was triggered by a series of events over the weekend, with President Donald Trump stating that the US Navy fired on an Iranian container ship in the Gulf of Oman and then seized the vessel, claiming it was attempting to breach a US blockade.
Furthermore, the previous day, Iran also reportedly attacked a tanker in the Strait of Hormuz, the hub of the UK Maritime Operations (UKMTO), claiming that Revolutionary Guards fast-boats fired on the tanker and that a container ship was hit by an unidentified projectile.
Markets saw increased volatility as signals of de-escalation over the weekend quickly turned into renewed escalation. ING highlighted that oil prices are once again being "swayed" by developments in the Middle East, as the narrative of opening shipping lanes has shifted to uncertainty over transit conditions and the risk of disruptions.
From a policy perspective, Trump has again threatened to destroy Iranian infrastructure if there is no agreement, while the US-Iran ceasefire is expected to expire this week. The prospects for further negotiations are also uncertain: Trump said the talks will be held in Islamabad, but Iran has stated that it will not attend as long as the US naval blockade remains in place.
In context, the market had initially assessed the chances of a deal as improving late last week, and oil even fell on Friday after Iran declared the strait "open" to commercial traffic. However, the resurfacing of transit conditions and the US refusal to lift the blockade, which prompted Iran to reverse its stance that the strait will remain closed until the blockade is lifted, have brought the risk of supply disruption back into the market's primary focus. (asd)
Source: Newsmaker.id
