US Blockade of Iran Lifts Oil Prices
Oil prices surged again by around 2% on Wednesday (July 15th) after US President Donald Trump reimposed a naval blockade on all Iranian ports. Tensions escalated after Iran's Revolutionary Guard Corps threatened to shut off other export routes that benefit the US and its allies.
Brent crude rose US$1.71, or 2%, to US$86.44 per barrel. Meanwhile, West Texas Intermediate, or WTI, rose US$1.43, or 1.8%, to US$80.77 per barrel. This increase extended previous gains, after oil prices closed up 2% to a one-month high.
Market concerns resurfaced about supply disruptions in the Strait of Hormuz, a vital waterway through which approximately one-fifth of the world's oil and LNG typically passed before the Iran war broke out. Iran's Revolutionary Guard Corps stated that regional energy exports must be shared, or not shared at all.
The conflict between the US and Iran escalated again after a fragile ceasefire began to unravel. Early Wednesday morning, the US military launched a new strike to weaken Iran's ability to attack commercial shipping in the Strait of Hormuz. Trump also stated that energy targets would be saved for the final stage but could still be attacked if necessary.
Goldman Sachs estimates that Gulf exports briefly recovered to above 80% of pre-war levels following the US-Iran memorandum of understanding in June. However, in the past week, exports have fallen back below 50%, or around 11 million barrels per day. The bank even warned that Brent could reach US$110 per barrel in the fourth quarter if the recovery in Gulf exports continues to be hampered.
Tensions also flared after Iran claimed to have launched drone attacks on US positions at the Azraq base in Jordan, as well as targeting weapons and storage facilities in Bahrain and Kuwait. As a result, oil remains at risk of remaining high as long as the blockade, the threat of export route closures, and cross-regional attacks have not subsided. If energy prices continue to rise, global inflationary pressures could again pose a major threat to the market. (arl)
Source: Newsmaker.id
