Supply risks around the Strait of Hormuz are pushing crude higher, raising fuel costs and economic pressure worldwide
Oil prices jumped on Monday after the US seized an Iranian-flagged cargo ship near the Strait of Hormuz, dimming prospects for peace in the war on Iran and raising fresh supply concerns.
Both Brent and West Texas Intermediate jumped more than 6%, to above $96 and $88 per barrel, respectively, in the latest swing after weeks of volatile trading. The gains followed renewed disruptions to shipping through the Strait of Hormuz over the weekend after a brief reopening late last week. Tehran has warned the route will remain restricted unless the US naval blockade is lifted.
On Sunday, a US warship fired at and seized an Iranian-flagged cargo vessel, the Touska, in the Gulf of Oman. According to the US military, the ship was attempting to breach the naval blockade and reach Bandar Abbas via the Strait of Hormuz. Tehran condemned the move as “armed maritime piracy,” accusing Washington of violating the ceasefire in place since April 8 and warning of retaliation.
The US-Israeli bombing campaign prompted Iran to restrict passage through the strait, a conduit for roughly 20% of global oil, for “enemy ships,” snarling supply chains and sending prices higher. Prices had eased earlier this month during the first round of US-Iran talks in Islamabad on hopes of the strait reopening, before rebounding after the negotiations collapsed.
Analysts say markets are reacting primarily to the threat of reduced supply, with traders pricing in further disruptions to Gulf exports. Kuwait, a major crude exporters, has reportedly declared force majeure on some oil and fuel shipments.
OPEC+ production limits and higher shipping and insurance costs are constraining producers’ ability to replace lost barrels. Industry estimates suggest hundreds of millions of barrels are now effectively stranded behind the chokepoint.
Higher crude prices are feeding through petrol and diesel across Europe, the US, and parts of Asia. Wholesale gas prices have risen, and heating-oil futures – a proxy for jet fuel – are also up. The renewed surge in energy bills is adding to public frustration.
The Hormuz disruption has triggered ripple effects across the global economy. The International Energy Agency has warned of rising market volatility and possible jet fuel shortages in Europe within six weeks. Humanitarian organizations have also flagged knock-on risks to global food security as fertilizer and agricultural supply chains are affected.
Europe is widely seen as one of the biggest losers from the Hormuz blockade due to its heavy reliance on Middle Eastern oil after sanctioning Russian supplies. Moscow, by contrast, has benefited from higher prices and stronger demand for its crude, with estimates putting the windfall at up to $150 million a day.
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