Oil Rises, US-Iran Clashes Maintain Hormuz Risk Premium
Oil prices rose after renewed clashes between US and Iranian forces further clouded the prospects for a deal to end the nearly 10-week-old war. The market is once again pricing in the risk of supply disruptions, with the primary focus remaining on the Strait of Hormuz, a key energy trade route.
Brent briefly rose as much as 2.9% to near $103 per barrel before paring gains, while WTI hovered around $95. US Central Command stated that US forces struck military targets in Iran after Iran fired on three US Navy destroyers passing through the strait, but added that it was “not seeking escalation” but remained ready to protect US forces.
President Donald Trump said three warships had successfully exited the waterway unharmed, according to a social media post. In his statement, Trump also warned of a harsher response if Iran did not sign a deal soon, emphasizing that diplomacy was still on the table but that the risks were increasing.
On the supply side, the market assessed that structural risks remained high, as the Strait of Hormuz was said to have been effectively closed since the war began in late February. The closure triggered a supply shock, with crude oil flows halted and several wells in the region shut down. The situation in the strait has been described as a “double blockade,” with Tehran obstructing traffic while the US prevents ships from calling or leaving Iranian ports.
Market participants see oil moving between two opposing scenarios: diplomacy and escalation. Charu Chanana of Saxo Markets said the market still gives the peace proposals a chance, but not enough to remove the “war premium” from oil prices. Uncertainty was further heightened by reports from the United Arab Emirates that their air defense systems intercepted missiles and drones on Friday.
On the policy and mitigation front, Trump said the ceasefire is still in effect and believes there is no need to restrict US crude oil or jet fuel exports due to large domestic reserves. Meanwhile, IEA head Fatih Birol warned that the world is losing 14 million barrels per day due to the war, and that production recovery after the conflict will be gradual. The IEA also reiterated its readiness to take additional steps following the 400 million barrel release agreement in March. Ray Dalio's comments underscore the sensitivity of the conflict narrative to the issue of control of the Strait of Hormuz, which remains a key factor shaping oil volatility in the short term. (asd)*
Source: Newsmaker.id
