Oil Prices Remain Elevated as Iran Conflict Enters Third Week, Strait of Hormuz Remains Closed
DUBAI, United Arab Emirates (AP) — Brent crude oil hovered near $100 a barrel Friday as the conflict between the U.S., Israel and Iran stretched into its third week, with no immediate end in sight. The continued closure of the Strait of Hormuz, a vital global oil shipping route, is fueling market anxieties and raising concerns about a potential global economic shock.
Brent futures were down 1.13% at $99.32 per barrel at 7:49 a.m. ET, after surpassing $100 on Thursday. West Texas Intermediate crude futures fell by 2.07% to $93.75 per barrel.
The surge in oil prices follows a dramatic climb last week, with Brent rising by more than 9% and WTI marking its best week since 1983. The previous week saw the largest weekly gain in oil prices since the start of the COVID-19 pandemic in 2020.
The situation escalated overnight when former U.S. President Donald Trump indicated that a resolution to the conflict wasn’t imminent, stating the U.S. possesses “unparalleled firepower, unlimited ammunition, and plenty of time.” He urged followers to “watch what happens” to the Iranian regime.
Trump reportedly told G7 leaders earlier this week that Iran was “about to surrender,” according to Axios. However, Iran’s new supreme leader, Mojtaba Khamenei, countered with a vow to continue fighting, delivered via state television.
Several foreign ships in or near the Strait of Hormuz have been struck by ammunition this week, exacerbating fears of a prolonged war and its potential impact on the global economy.
Ebrahim Zolfaqari, spokesperson for Iran’s military command, warned on Wednesday, “Get ready for oil to be $200 a barrel, because the oil price depends on regional security, which you have destabilised,” Reuters reported.
Despite an unprecedented release of 400 million barrels of oil from the International Energy Agency’s emergency reserves and the temporary lifting of some sanctions on Russian exports by the White House, oil prices remain elevated.
Barclays’ Emmanuel Cau noted growing investor nervousness, despite an initial expectation of a short-lived conflict. “Investors still believe in the Trump put, hence global equities are not down as much as in past oil shocks,” Cau said. “But nervousness is growing by the day and the longer the Strait of Hormuz stays closed the more stagflationary markets will turn. Watch central banks next week amid hawkish repricing in rates.”
Amjad Bseisu, CEO of British petroleum production company EnQuest, told CNBC’s “Squawk Box Europe” that the oil market has “never seen something of this magnitude before.” He warned that each day of delay results in another 20 million barrels removed from the market, with continuing repercussions.
Bseisu drew parallels to the Arab embargo of the 1970s, which led to a quadrupling of oil prices. “Then we saw quadrupling of prices, and I think we’ve seen prices here come up 50% but I do think this is going to be quite a long run,” he said.
