Hormuz Blockade Threat Raises Risk Premium, Oil Soars
Oil prices surged on Monday after US President Donald Trump ordered a blockade of the Strait of Hormuz, following the collapse of peace talks over the weekend. Risk sentiment immediately worsened, sending stocks lower and bond markets volatile.
Brent crude rose 7.4% to just above US$102 per barrel on concerns the blockade would disrupt energy flows in the key shipping lane. Meanwhile, WTI crude rose 8.8% to US$105.02 per barrel, reflecting a short-term surge in risk premiums.
Pressure spread to riskier assets. Asian markets fell about 1% and S&P 500 futures weakened, as higher oil prices were seen as hurting economic growth through rising energy costs and inflation. The US dollar strengthened against major currencies as it regained its safe-haven status.
The central dynamics revolve around the planned implementation of a US military blockade of maritime traffic in and out of Iranian ports starting Monday at 10:00 a.m. New York time, according to a statement from US Central Command. The US has stated that it will not interfere with ships passing through Hormuz to non-Iranian ports, while Iran has said it will not allow the blockade to continue.
Trump also stated that the US will intercept ships that pay a "toll" to Iran for safe passage through Hormuz and will conduct mine clearance in the strait. If effective, the blockade could potentially halt nearly two million barrels per day of Iranian oil exports that currently pass through the strait, adding to pressure on global supply.
Going forward, the direction of oil prices will be largely determined by two factors: whether the blockade actually reduces the physical flow of shipments and whether Iran responds with retaliatory measures that disrupt shipping. During times of high uncertainty, the market tends to maintain a risk premium on oil, with price movements sensitive to diplomatic headlines, shipping security reports, tanker rerouting and insurance costs. (asd)
Source: Newsmaker.id
