Brent Recovers, Market Eyes Alternative Routes Amid Hormuz Shutdown
Oil prices recovered from earlier declines as market participants monitored efforts to divert supply from the Strait of Hormuz, while much of the Persian Gulf flow remained blocked by the war in Iran. Brent traded near US$103 per barrel after rising more than 3% on Tuesday, amid conflicting signals: Iran vowed retaliation for the attack that killed its security chief Ali Larijani, while US President Donald Trump said the conflict could end soon.
Gulf states have begun relying on alternative routes, but their capacity is limited. Iraq will resume exports via a pipeline from the Kurdistan region to the Turkish port of Ceyhan, but this diversion can only accommodate a fraction of Iraqi production, which is said to have fallen to about a third of pre-war levels. With Hormuz traffic essentially halted, the market believes a physical supply recovery remains unlikely without a change in the security situation.
Brent has risen nearly 70% year-to-date, with the biggest surge coming after the US-Israeli attacks on Iran and Tehran's retaliatory attacks on energy assets and shipping. The main impact has been rising energy prices and global inflation concerns, which are now overshadowing the central bank agenda—especially ahead of Wednesday's Federal Reserve meeting, although interest rates are expected to remain unchanged.
Market focus remains on the "technically closed" status of Hormuz, with access seen as increasingly determined by political calculations, including the possibility of Iran allowing only a handful of ships through. Market indicators are also volatile: WTI's discount to Brent briefly widened above US$9, its largest since July 2022, amid hedging factors related to the release of emergency reserves.
Westpac assesses that Brent has the potential to remain in its new, higher "price regime" of US$95–US$110 as long as hostilities show no signs of ending. The bank warned that the range could shift upwards to US$10–US$20 if major refinery disruptions occur or additional mining is confirmed in the strait. (alg)
Source: Newsmaker.id
