Oil Rebounds After Hormuz Attack
Oil prices rebounded in trading on Thursday (June 25th) after erasing post-war gains. The rise occurred after reports of an attack on a cargo ship near the Strait of Hormuz, rekindling concerns that tensions in the Middle East had not fully subsided.
Early in trading, oil prices weakened as investors expected global supply to improve. This optimism arose after several tankers stranded for months in the Persian Gulf began to exit through the Strait of Hormuz. This led the market to initially assess the war risk premium in oil prices as starting to fade.
According to data from trade tracking firm Kpler, more than 20 tankers carrying approximately 35 million barrels of crude oil have passed through the Strait of Hormuz since the United States and Iran reached an agreement to reopen the key shipping lane. The non-Iranian vessels had previously been stranded in the Persian Gulf for more than three months after Tehran effectively closed the waterway at the start of the conflict. Most of the vessels are expected to arrive in Asia in early August.
Citi believes the worst of the pressure on its curve-based commodity trading strategy is likely over. This strategy was previously hit during the US-Iran war, as a surge in short-term oil prices hurt positions that sold near-term contracts and bought longer-term contracts. The bank used a major de-escalation as its base case and estimated Brent could fall to the US$60 to US$65 per barrel range in the next six to twelve months, as flows through the Strait of Hormuz normalize.
However, market sentiment changed rapidly after Iran reportedly attacked a cargo ship near Oman. A US official blamed Iran for the attack. This incident heightened concerns about supply disruptions, especially as the Strait of Hormuz is a vital route for global oil trade.
West Texas Intermediate (WTI) prices rebounded by more than 2% to close at US$71.92 per barrel. Meanwhile, international Brent crude rose 2.1% to US$75.26 per barrel. This increase indicates that despite supply recovery, the oil market remains highly sensitive to security risks in Middle Eastern shipping lanes.
Meanwhile, Iran's Islamic Revolutionary Guard Corps Navy warned that safe navigation through the Strait of Hormuz would only be guaranteed if ships followed routes determined by Tehran. Iran also warned that ships violating transit instructions could face action. This statement emphasized that the risk to this key shipping lane has not yet been completely eliminated.
Under these conditions, oil prices still have the potential to fluctuate. If shipping flows remain normal and tensions do not escalate, oil prices could weaken again towards pre-war levels. However, if new attacks occur or Iran tightens control over the Strait of Hormuz, the risk premium could return to oil prices and push Brent and WTI higher.
Source: Newsmaker.id
