Hormuz Strait shutdown sparks concerns over potential surge in global oil prices

US-Iran Conflict Sparks Oil Price Surge in Strait of Hormuz

A surge in oil prices has been triggered by the US-Iran conflict, with tensions escalating to a point where shipping through the Strait of Hormuz, one of the world’s most critical energy chokepoints, has come to a near halt. The strait, which carries approximately one-fifth of the global oil consumed and significant quantities of gas, has seen Iranian attacks on oil tankers in the region.

According to reports, at least five tankers have been damaged, two personnel killed, and around 150 ships are stranded in the area. Iran’s Revolutionary Guard Corps (IRGC) has stated that the strait is “closed” and any vessel attempting to pass through will be set ablaze.

The conflict has resulted in a significant decrease in shipping traffic, with estimates suggesting a decline of at least 80 percent. Maritime intelligence analysts have noted that the shipping industry had already been experiencing increased freight costs for routes out of the Middle East and the Gulf.

Vessel tracking service Kpler reported limited traffic through the strait on Sunday, primarily consisting of ships flying the flag of Iran and its major trading partner China. However, it is possible that some ships may have passed through the strait without detection.

The impact of the conflict on oil prices has been significant, with prices rising above $79.40 per barrel on Monday. The majority of crude oil shipped through the Strait of Hormuz goes to Asia, with China, India, Japan, and South Korea accounting for nearly 70 percent of shipments.

Industry experts have noted that the situation is fluid and that disruptions to supply chains are likely to be felt globally. Companies are rerouting their ships, resulting in longer delivery times and increased costs.

Source: Al Jazeera