Oil prices climbed to nearly six-week highs as strikes between the United States and Iran disrupted traffic through the Strait of Hormuz, a route that carries roughly one-fifth of global oil supply during peacetime. Brent futures hovered around $97 a barrel, while US West Texas Intermediate crude reached $92.27.
Strikes reduce shipping through the oil chokepoint
The United States struck three Iranian oil tankers on Saturday, while Iran’s Islamic Revolutionary Guard Corps said it had hit three tankers and three US-linked vessels elsewhere. The reduced traffic has added to concerns about supply shortages.
Saudi Aramco’s Jizan facilities were struck for a second time in a month, according to the Financial Times, which cited two people familiar with the matter. Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said the attack may delay the facility’s return to production. For additional context, see “Brent crude climbs as Strait of Hormuz deal remains uncertain”.
Key points
- Brent crude was up 9 percent over five days and 19 percent over one month.
- West Texas Intermediate rose 79 cents to $92.27 a barrel.
- An average of 10 commodity ships crossed the strait each day over the previous 10 days.
- Brent was approaching the $97.93 level recorded on July 24.
US households face higher fuel costs
The national average US petrol price reached $4.15 a gallon, up from $4.08 a week earlier and $4.04 a month earlier. The price was $2.98 on February 28, marking a 39 percent increase since the war began.
Average diesel prices topped $5.90 a gallon after reaching a record $5.85 the previous week. Patrick De Haan, head of petroleum analysis at GasBuddy, said the higher diesel costs could feed into prices across the economy.
US households have spent an average of $764.59 on fuel since the war began, or $418.82 more than usual, according to Brown University’s Watson School of International and Public Affairs. AAA forecasts also showed flight costs were 20 percent higher for the September 5–7 Labor Day weekend than for the same weekend a year earlier. A related part of this story is covered in “Bab al-Mandab Strait Tensions Drive Brent Crude Above $100 Amid Middle East Crisis”.
China turns to domestic reserves and alternatives
China and other East and Southeast Asian markets depend more directly on oil imports moving through the strait than the United States. China has responded by drawing on its strategic petroleum reserve and reducing reliance on imports.
John Gong, an economics professor at the University of International Business and Economics, said China can also draw on domestic resources and supplies from Russia. He said more than 50 percent of cars sold in China are electric as Beijing advances its shift toward alternative energy and vehicles requiring little or no oil. The development of this issue can be followed in “Brent crude climbs as hopes fade for a Hormuz reopening”.
What happens next
Arif Gasilov of the Gasilov Group said the market could reach a point where a ceasefire produces little movement in prices if the disruption continues, though he said that outcome would depend on how long the conflict lasts.
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