Oil Rallies, Hormuz Flow Becomes Critical Point
Oil prices extended their surge on Wednesday (March 4th) as the market continued to focus on the risk of supply disruptions due to the escalation of the US–Israel–Iran conflict and disruptions to shipping flows in the Strait of Hormuz. Brent and WTI extended gains after a sharp rally over the past two days, when geopolitical risk premiums once again dominated price formation.
At 9:35 a.m. ET, Brent was up about 3% at around US$84 per barrel, while WTI strengthened to the US$76–77 per barrel area.
The conflict, which is entering its fifth day, has fueled market concerns that logistical disruptions could spread to upstream production. Reuters reported that Iraq is cutting output as export routes are affected, with the largest cuts occurring at Rumaila and West Qurna 2, and there is a risk of deeper declines if shipping bottlenecks persist due to limited storage capacity at southern ports.
The Strait of Hormuz is in focus as it is a strategic chokepoint for global oil and LNG flows. As shipping traffic and insurance risks increase, market participants tend to add a risk premium to oil prices to compensate for short-term supply uncertainty, including potential shipping delays and rerouting.
From a macro transmission perspective, rising oil prices magnify the risk of energy inflation and could shift interest rate expectations, especially if the surge persists. Goldman Sachs, for example, highlights that a scenario where the Hormuz flow is declining could tighten global supply balances, add pressure on OECD inventories, and keep price risks skewed to the upside if the disruption persists or energy infrastructure is impacted.
Going forward, the market will monitor the operational status of the Strait of Hormuz and tanker flows, developments in Iraqi production and exports, and movements in risk premiums (including insurance and freight costs), which will signal how quickly supply disruptions translate into prices.
Source: Newsmaker.id
