Oil prices surge as US and Iran exchange attacks over Strait of Hormuz

Oil prices surged on Monday after a new escalation of hostilities between the United States and Iran over the strategic Strait of Hormuz. Brent crude futures for September delivery rose more than 4 percent to $79.17 a barrel, the highest since June 22.

The US Central Command (CENTCOM) said it carried out dozens of strikes on Iran on Sunday to degrade its ability to attack vessels in the strait, following earlier strikes on hundreds of targets. Washington accused Iranian forces of attacking a Cyprus-flagged container ship, the MV GFS Galaxy, while it was transiting the strait. In response, Iran launched a wave of missile and drone attacks on the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain.

Iran’s Persian Gulf Strait Authority, which claims the right to control traffic through the strait, reiterated that vessels not using its preferred route would not receive safe passage guarantees, and that the consequences would be the responsibility of the vessel’s owner and operator.

Maritime traffic through the Strait of Hormuz has declined sharply. According to maritime intelligence platform Windward, only six vessels crossed the strait between 18:00 GMT on Thursday and 06:00 GMT on Friday, compared with 18-22 daily crossings earlier this month. Between 18:00 GMT on Saturday and 06:00 GMT on Sunday, nine vessels were tracked, four of which were Iranian-flagged. Before the war, roughly 130 vessels transited the strait daily, which handles one-fifth of global oil trade in peacetime.

Oil prices, which had returned to pre-conflict levels after a ceasefire memorandum was signed on June 17, are now about 9 percent higher than before the US and Israel launched their initial strikes on Iran in late February.

Analysts expect Brent to remain in the upper $70s per barrel in August and September amid heightened geopolitical uncertainty. Mukesh Sahdev of XAnalysts in Sydney said there could be occasional spikes and dips, but noted that long-haul procurement decisions have already reduced immediate reliance on the Middle East. Fabien Yip of IG in Sydney argued that a repeat of earlier price spikes is unlikely due to slow demand recovery and OPEC+ output quota expansion.

Major Asian stock markets fell on Monday. Japan’s Nikkei 225 dropped more than 1 percent, South Korea’s Kospi plunged more than 5 percent, and Hong Kong’s Hang Seng Index dipped about 0.2 percent.