Brent crude rose more than 1 percent on Monday after Iran said the Strait of Hormuz would not reopen until the United States met conditions including easing sanctions and paying war reparations. Brent futures for October stood at $83.77 a barrel at 2:30 GMT, about 16 percent above their level before the US and Israel’s war on Iran began.
The demands have reduced hopes for a quick return to stable energy markets. Shipping through the waterway, which carried about one-fifth of global oil supplies before the war, has effectively collapsed since the conflict began in late February.
What Iran says is required
Iranian Foreign Minister Abbas Araghchi said on Sunday that Tehran and Oman were close to an agreement on the Strait of Hormuz. He said reopening would still depend on Washington meeting certain conditions, including sanctions relief and war reparations.
The lack of a concrete agreement and unanswered questions about how any deal would work are keeping a risk premium in oil prices, according to Tim Waterer, chief market analyst at Sydney-based KCM Trade. Waterer said traders were becoming more cautious as time passed without a breakthrough.
Related coverage: Bab al-Mandab Strait Tensions Drive Brent Crude Above $100 Amid Middle East Crisis.
Traffic has fallen sharply
Between eight and 15 vessels crossed the strait on August 4, August 5 and August 6, according to ship-tracking platform MarineTraffic. That compares with roughly 130 transits before the conflict.
Iran has repeatedly asserted a right to control shipping in the strait and has threatened to attack commercial vessels using routes it has not approved. Freedom of navigation is a cornerstone of international maritime law, according to the supplied report.
Security risks are adding to market anxiety
The United Arab Emirates condemned Tehran on Saturday over what it said was an Iranian missile attack on a vessel owned by the Abu Dhabi National Oil Company. The International Maritime Organization has recorded at least 64 violent incidents and 17 deaths involving commercial vessels in the region since the war began; most of those incidents have been blamed on Iran.
More context: US strikes on Iran trigger rise in oil prices and fall in global stocks amid Hormuz tensions.
Asian stocks nevertheless rose on Monday morning. Japan’s Nikkei 225 gained 2.1 percent, South Korea’s Kospi rose 0.7 percent and Hong Kong’s Hang Seng Index advanced 0.6 percent.
Waterer said that even if a reopening agreement is announced, doubts about its durability could limit any decline in oil prices because traders would continue to account for the risk that the arrangement could be reversed.
Also read: Oil prices reach one-month peak as US-Iran conflict disrupts Strait of Hormuz shipping.
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