Hormuz Triggers Oil Prices, Soaring!
Oil prices surged again after US President Donald Trump reinstated a naval blockade on Iranian vessels passing through the Strait of Hormuz. Brent rose above US$85 per barrel for the first time in a month, while WTI moved above US$80 per barrel.
This increase came after Brent had surged nearly 10% in trading on Monday. In Asian trading, Brent for September rose 2.7% to US$85.57 per barrel, while WTI for August rose 2.8% to US$80.31 per barrel. This surge indicates the market is re-factoring the risk of war into oil prices.
Trump also demanded a 20% reimbursement on all cargo passing through the Strait of Hormuz. For a supertanker fully loaded with oil, this levy is estimated to be around US$30 million. Trump said countries that receive US protection in the waterway, such as Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, and Kuwait, should contribute to the security costs.
Tensions escalated after US forces launched attacks on Iran for the third consecutive night, with the operation reportedly expected to last several more days. The Joint Maritime Information Center stated that CENTCOM would begin enforcing a blockade of all Iranian ports and coastal areas on Tuesday afternoon, New York time.
Iran responded harshly. The Iranian military reported attacking US assets in Kuwait using drones and targeting a ship it described as an "enemy vessel" with cruise missiles. The United Arab Emirates also reported that two of its tankers attacked Omani territory as it passed through the southern Strait of Hormuz. Diplomatically, Iran said the agreement with Washington had entered a crisis phase and asserted that it would not comply with its commitments as long as the US was deemed to be violating the agreement.
As a result, oil prices have the potential to remain high as long as the blockade and attacks around Hormuz continue. If supplies from the Persian Gulf are disrupted for longer, global inflationary pressures could increase and make central bank policy more difficult to manage. However, if the Hormuz Strait reopens, oil prices risk falling rapidly as some of the war premium could be immediately removed from the market. (asd)
Source: Newsmaker.id
