Oil Prices Rise Amid Tensions in Strait of Hormuz

Oil Prices Rise Amid Tensions in Strait of Hormuz

The price of Brent crude oil has increased by nearly 6 percent to $114.44 a barrel on Monday, according to market data. This surge follows reports of violence in the Strait of Hormuz, where tensions between the United States and Iran have escalated.

US military officials stated that they had destroyed six Iranian boats in response to attacks on commercial vessels in the waterway. The United Arab Emirates also reported being targeted by Iranian missiles and drones. An Iranian military source denied US claims of sinking several Iranian boats, calling them “false”.

The market is pricing oil higher due to concerns over potential damage to oil infrastructure and the likelihood that the Strait of Hormuz will be shut beyond its previously announced timeline.

Despite a recent announcement from US President Donald Trump stating that the United States military would guide commercial vessels through the critical strait, shipping companies have been hesitant to transit the waterway. The head of the International Transport Workers’ Federation has called for ships to not cross the strait without a full guarantee of safety.

According to the International Maritime Organization (IMO), up to 20,000 seafarers remain stranded on vessels in the Strait of Hormuz. The United Nations has expressed concern over the closure of the waterway, stating that it is “impeding the delivery of oil, gas, fertiliser, and other critical commodities” and “strangling the global economy”.

Oil prices have risen by more than 50 percent since the start of the war in late February, amid an estimated daily production shortfall of 14.5 million barrels. Analysts predict that prices will remain elevated due to a backlog of unloaded cargo, damaged regional infrastructure, and the need to clear Iranian mines.

Source: Al Jazeera