Hormuz Strait Blockage, Oil Rises!
Oil prices continued to rise as new attacks flared in the Middle East, while market participants weighed US plans to insure and escort tankers passing through the Strait of Hormuz when traffic in the vital waterway was reportedly at a near standstill.
WTI rose past $75 per barrel after rallying about 11% in two days (its biggest two-day gain in four years). Brent closed near $81. President Donald Trump said on Tuesday that the US International Development Finance Corporation (DFC) would offer insurance to ships to maintain the flow of energy and other trade, with the option of naval escorts “if needed.”
The US move comes amid growing signs of disruption in the producing region following the closure of the shipping lane. Iraq—OPEC’s second-largest producer—has reportedly begun shutting down operations at its Rumaila field (the country’s largest) and its West Qurna 2 project. If the shutdown goes ahead, a significant portion of Iraq’s output could potentially be affected. The US-Israel conflict against Iran has also added to the energy market turmoil: trade disruptions, producers have begun to “lock in” output, and some refineries and gas export facilities have reportedly been impacted.
The hostilities continued into Wednesday, entering their fifth day. The Israeli military said it had launched a “broad wave of attacks” targeting Iranian launch sites, air defense systems, and infrastructure—keeping risk premiums high on oil, gas, and derivatives.
The narrow Strait of Hormuz, which connects the Persian Gulf to the Indian Ocean, plays a crucial role in global energy trade, carrying about a fifth of the world’s oil and gas. Since the conflict broke out last Saturday, many tankers have avoided this chokepoint due to heightened risks, including Tehran’s threats against ships that continue to pass through.
However, the market believes insurance and escort plans still need to be proven. One senior energy trader said these are still “just words” until the details are clear: what the escorts will look like, how much insurance will cost, and whether shippers will actually feel secure. Following Trump's comments, Iran reiterated its warnings: the Islamic Revolutionary Guard Corps (IRGC) declared Hormuz a state of war and that ships passing through could be at risk of being hit by "deceptive" missiles or drones, and claimed to have attacked more than 10 tankers that ignored the warnings.
Beyond geopolitical factors, industry reports showed US crude oil inventories rose by 5.7 million barrels last week, with official data scheduled for release on Wednesday. In the Asian session, April WTI rose about 1.1% to $75.41 (morning in Singapore), while May Brent closed 4.7% higher on Tuesday at $81.40. (Asd)
Source: Newsmaker.id
