Oil Prices Ease After Renewed Strait of Hormuz Violence
Quick Look
Oil prices eased after an initial jump following renewed violence in the Strait of Hormuz, where a cargo vessel was struck by an "unknown projectile." The incident, attributed to Iran by US officials, led to the IMO pausing ship evacuations and caused steep losses in Asian markets.
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Why It Matters
The violence follows a US-Iran memorandum of understanding signed last week, aimed at ending nearly four months of war, which had caused oil prices to drop sharply.
Oil prices have eased after jumping earlier amid renewed violence in the Strait of Hormuz.
Brent crude, the international benchmark, fell 1.80 percent on Friday, after rising as much as 4 percent following the International Maritime Organization’s decision to pause its planned evacuation of ships stranded around the critical waterway.
The IMO suspended its evacuation plan after a cargo vessel reported being struck by an “unknown projectile” while attempting to cross the strait near the Omani coast.
Brent futures for August delivery stood at $74.11 per barrel as of 05:00 GMT, after topping $76 on Thursday.
The price of Brent, which dropped sharply after the United States and Iran last week signed a memorandum of understanding on ending nearly four months of war, is currently hovering about 2 percent above its pre-conflict level.
Asian markets suffered steep losses on Friday, with key indices in Japan, South Korea, Hong Kong and Taiwan falling sharply.
Seoul’s Kospi, the best-performing major index this year, was down 8 percent as of 05:00 GMT, while Tokyo’s Nikkei 225 was about 4.6 percent lower.
The Taiex in Taipei was down more than 3 percent, while the Hang Seng Index in Hong Kong was 1.9 percent in the red.
Thursday’s attack in the strait, through which about one-fifth of global oil and liquified natural gas supplies transit in peacetime, dented hopes for a return to normal shipping in the Gulf after a resurgence in traffic in recent days.
On Wednesday, 70 vessels transited the waterway, a more than twofold increase from the previous day and the highest daily figure since March 1, according to ship tracking platforms MarineTraffic and Kpler.
US officials have attributed the attack to Iran, according to reports by multiple media outlets, including The New York Times, CBS News and Reuters.
Iran’s Persian Gulf Strait Authority, which claims the right to regulate shipping in the strait, said after the attack that any vessel attempting to use routes outside its designated “framework” would not be guaranteed safe passage.
“The consequences arising from passage through unauthorized routes shall be the responsibility of the owner, operator, and vessel commander,” the authority said on X.
June Goh, a senior oil market analyst at Sparta in Singapore, said the attack was a reminder to markets of the fragility of peace in the strait amid the tenuous US-Iran ceasefire.
“There is a pressing need for tankers to enter and offload the high crude stocks from onshore tanks in order for normal production to resume again,” Goh told Al Jazeera.
“Thus, security of the passageway is paramount to recover the lost supply.”
Open Questions
- What was the "unknown projectile"?
- What specific actions will the Persian Gulf Strait Authority take against "unauthorized routes"?
