Oil Soars, Trump Reimposes Iran Blockade
Oil prices surged sharply on Monday (July 13th) after United States President Donald Trump announced the US would reimpose a naval blockade on Iran. This move comes as Washington and Tehran compete for influence over the Strait of Hormuz, one of the world's most vital energy routes.
Brent crude, the international oil benchmark, rose 9.6% to close at US$83.30 per barrel. Meanwhile, West Texas Intermediate (WTI) rose 9.4% to US$78.14 per barrel. This sharp increase indicates the market is starting to re-introduce a war risk premium into oil prices.
Trump stated that the US would re-instate the blockade on Iranian shipping. He stated that the blockade is only intended to prevent Iranian vessels or Iranian customers from entering and exiting the Strait of Hormuz. He said other countries would continue to use the waterway openly and fairly.
In addition to maintaining traffic in Hormuz, Trump also demanded a 20% reimbursement of all cargo shipped through the waterway. This statement immediately sparked renewed concerns in the energy market as it could escalate tensions with Iran and other countries dependent on shipping through the Strait of Hormuz.
The US decision to reimpose the blockade comes after the United States and Iran exchanged attacks over the weekend. The US military reportedly struck Iran again on Sunday, after hitting 140 targets the day before. CENTCOM said the strikes were in response to an Iranian Revolutionary Guard Corps attack on a container ship transiting the Strait of Hormuz.
As a result, oil prices have the potential to remain high as long as the US-Iran conflict persists. Rising oil prices could trigger renewed inflation concerns, potentially making the Fed more hawkish, and putting pressure on riskier assets like stocks and crypto. On the other hand, the energy sector has the potential to benefit from the surge in oil prices.
Source: Newsmaker.id
