Brent Holds Near $100, Hormuz Key to Risk Premium and Volatility
Brent traded around $100 per barrel on Friday after one of its most volatile weeks, as the market braced for further turmoil following Iran's commitment to keep the Strait of Hormuz "effectively closed." Brent surged 9.2% in the previous session, while WTI hovered around $95 after a week of extreme volatility.
The primary driver remains physical flow risk. In his first public comments since succeeding his father, Iran's new supreme leader, Mojtaba Khamenei, said Tehran would work to ensure the strategic oil and gas route remains closed. Slowing shipping through the narrow strait has disrupted shipments of crude oil, natural gas, and products like diesel, raising energy prices and fueling inflation concerns in some economies.
The policy-reassuring measures have not yet changed market sentiment. The US issued a second temporary waiver for purchases of Russian oil—covering cargoes loaded onto ships before March 12—broader than the previous directive that only allowed India. However, the market's focus remains on whether Hormuz flows can be restored, rather than on limited short-term supply additions.
The International Energy Agency (IEA) warned on Thursday that this supply disruption is the largest in the history of the global oil market, a day after its members agreed to release emergency reserves to cool prices. Some market participants believe the stock release could prevent the surge from reaching extreme levels, but the effect is likely to be temporary if navigational obstacles remain unresolved.
Shipping security risks add a "cost of uncertainty" to prices. Reports suggest Iran has begun laying mines in Hormuz, raising risks for shipping companies and insurers. The US government stated that the Navy could begin escorting tankers through the strait by the end of March, but earlier escort claims were later withdrawn, confirming that the route remains operationally complex.
In terms of market behavior, volatility has been a separate story. WTI has reportedly been trading around US$43 this week and Brent around US$38, with fluctuations exacerbated by financial flows from the options market to ETFs. With no signs of de-escalation, market participants expect volatility to remain high until there is clarity on physical flows and security in Hormuz.
On Friday afternoon in Singapore, Brent May crude remained relatively stable at around US$100.47 per barrel, while WTI April crude edged down 0.3% to US$95.47. As long as the status of Hormuz remains uncertain, the supply risk premium has the potential to persist and keep the price range wide despite short-term policy intervention. (asd)
Source: Newsmaker.id
