The prices are soaring after renewed tensions in the Middle East and fears of disruption to shipping in the Seaway of Hormuz.
The international market energy is entering a new phase of intense volatility, as oil prices register a strong upward move in a matter of hours, reflecting heightened geopolitical uncertainty in the Middle East. Developments around US-Iran relations and concerns about possible disruption or restriction of commercial shipping flows in one of the world’s most critical energy passages have caused strong turbulence in markets, leading investors to immediate reactions and strong volatility in crude prices.
Crude oil prices registered a strong rise of around 5.5% on Monday, as increasing concerns about the collapse of the US-Iran ceasefire and renewed tensions in the Strait of Hormuz added to the uncertainty in markets.
Variance
Brent contracts gained $5.10 or 5.64% to close at $95.48 a barrel, while US West Texas Intermediate crude rose $5.76 or 6.87% to settle at $89.61.
The rise came just days after Friday’s plunge, when prices were down 9 percent in the biggest daily drop since April 18, following Tehran’s announcement that the passage of commercial ships through the Strait of Hormuz would remain open for as long as the ceasefire lasts.
However, the situation deteriorated over the weekend when the US seized an Iranian cargo ship attempting to violate the blockade, with Iran warning of retaliation, reinforcing fears of a resumption of hostilities.
“The goodwill that was created on Friday has now completely disappeared,” commented Bob Yorger, director of energy contracts at Mizuho.
Developments
With a two-week ceasefire set to expire later this week, the renewed tension casts doubt on the prospects of a second round of talks between the U.S. and Iran in Islamabad.
According to a senior Iranian official, Tehran is considering joining the negotiations, but no final decision has been made.
Iranian Foreign Minister Abbas Araghchi told his Pakistani counterpart Ishaq Dar that the “ongoing ceasefire violations” by the US are a key obstacle to the continuation of the diplomatic process.
For his part, Donald Trump said over the weekend that he was unsure whether to extend the ceasefire, but stressed that the naval blockade would remain in place.
Apart from the tension, analysts point out that oil prices remain lower than the highs recorded at the start of the Middle East crisis. As Yorger noted, “barring a full-scale military conflict, prices may move gradually downward.”
Navigation of the Strait of Hormuz, through which about a fifth of the world’s oil and LNG supply passes, remains essentially frozen, with just three transits recorded in the past 12 hours, according to shipping watchdog data.
