Oil Holds at 42-Month High Amid Hormuz Risks
Oil prices continued their rally after hitting their highest close since August 2022, as the market assessed the risk of prolonged supply disruptions following Iran's declaration that the Strait of Hormuz would remain "effectively closed." In Asian trading, West Texas Intermediate (WTI) edged higher at around US$97 per barrel, after surging about 10% on Thursday. Brent closed above US$100.
Market sentiment was driven by escalating logistical and security risks in the shipping lane crucial for oil and gas shipments. Iran's new supreme leader, Mojtaba Khamenei, in his first public comments since succeeding his father, stated that the Islamic Republic would work to ensure the waterway remains closed. British authorities assess that Iran may have begun laying mines, increasing the risk to ships considering passage.
Since the outbreak of hostilities on February 28, shipping traffic has reportedly dwindled to a "trickling" rate, including Iranian tankers carrying oil. Meanwhile, the International Energy Agency (IEA) warned on Thursday that this supply disruption would be the largest in the history of the global oil market. The day before, IEA members agreed to release large-scale emergency reserves to curb price increases.
US mitigation efforts are still considered limited in the near term. US Energy Secretary Chris Wright told CNBC that the US Navy could begin escorting tankers through Hormuz by the end of the month, while Treasury Secretary Scott Bessent told Sky News that escorts could occur "as soon as militarily feasible." However, risks on the ground remain high. Aaron Stein of the Foreign Policy Research Institute assessed that mine clearance during active combat cannot be undertaken without significant risk, and the available options will not immediately restore confidence in international shipping.
Price movements are also shaped by extreme volatility. WTI is said to have moved within a range of around US$43 this week, its widest range since the depths of the pandemic, when prices briefly turned negative. Brent has swung within a range of around US$38. Sharp fluctuations are exacerbated by financial flows from the options market to ETFs, making price responses to geopolitical news more rapid and substantial.
On the policy front, US President Donald Trump has stated that preventing Iran from acquiring nuclear weapons and becoming a threat in the Middle East is more important to him than oil prices, reinforcing the perception that the market will not soon receive verbal "cushions" from Washington.
WTI for April delivery reportedly rose 1.0% to US$96.73 per barrel at 7:54 a.m. in Singapore. Brent for May settlement closed up 9.2% on Thursday at US$100.46 per barrel. Going forward, market participants will monitor changes in the operational status of the Strait of Hormuz, indications of mines and shipping security, the release of emergency reserves, as well as signals from maritime security and the intensity of conflicts that shape the supply risk premium. (aasd)
Source: Newsmaker.id
