Oil Prices Surge Amid Middle East Tensions as Strait of Hormuz Faces Crisis

Brent crude oil prices, the benchmark in Europe, rose more than 5% at 8:16 AM just before the opening of stock markets in Europe, remaining slightly above the $96 per barrel mark. This is still a far cry from the $118 reached last Monday. On the night of Wednesday, Brent briefly surpassed the $100 barrier again. Nevertheless, Brent crude prices remain well above the $72 level that was observed before the recent military attack on Iran by the United States and Israel. Meanwhile, West Texas Intermediate (WTI) crude oil, the benchmark in the U.S., increased nearly 5% before the European stock market openings, reaching $91.49. Despite the International Energy Agency’s (IEA) decision to release 400 million barrels of strategic reserves, the surge in oil prices continues. This increase has been propelled by ongoing conflicts in the Middle East and difficulties in navigating the Strait of Hormuz, through which one-fifth of the world’s oil and gas flows. Markets remain volatile, despite U.S. measures aimed at mitigating the economic impact of rising oil prices. This situation is compounded by fears that the conflict may extend longer than anticipated. As part of the largest release of reserves in the IEA's history, the United States will contribute by releasing 172 million barrels, but concerns persist in the oil markets. Recent attacks on oil tankers in the Strait of Hormuz have added another layer of tension. UK maritime authorities reported new missile attacks of unknown origin on Thursday that struck two oil tankers, forcing evacuations due to fires aboard. This follows attacks on three other vessels earlier in the week amidst escalating military actions resulting from U.S. and Israeli offensives against Iran as well as Iran's responses. The hostilities have affected maritime traffic in the Strait of Hormuz, a crucial passage that facilitates the transportation of around one-fifth of the world’s maritime oil trade, in addition to significant volumes of liquefied natural gas and fertilizers. The near-paralysis of shipping operations in the Strait has compelled Gulf producers to cut output while simultaneously triggering significant spikes in both crude and natural gas prices. In the United States, the Dow Jones and Nasdaq indexes closed with slight declines below one-tenth of a percent on Tuesday. Asian stock markets experienced downturns on Thursday, with the Japanese Nikkei closing down 1%, the South Korean Kospi dropping nearly 0.5%, and Hong Kong's Hang Seng index falling nearly 0.9%. The Shanghai Stock Exchange recorded a minimal decline of around 0.1%. On the other hand, European markets are anticipated to open in the negative, with expected declines between 0.6% and 0.8%. The Ibex 35 index ended the previous session with a slight drop of 0.53%, settling at 17,351.9 points. By the closing of major European stock markets, Brent crude prices had risen $4.8 to $92, while WTI advanced by $4.58 to $87.35. The cost of natural gas also saw an increase, with the TTF contract traded in the Netherlands, a European benchmark, rising 4.02% to reach €49.30 per megawatt-hour. As the conflict extends to Day 13, Iran has shifted the focus of hostilities to the Strait of Hormuz, where two oil tankers and a container ship have been attacked and set ablaze. In reaction to the escalating crisis, Iraq announced the closure of its oil ports as a precaution. March 12 may mark a significant turning point, as Brent crude oil has once again surpassed $100 per barrel. The situation in the Strait of Hormuz serves as a critical key to understanding the rise in oil prices. The Strait functions as a narrow passage through which nearly all oil and gas exiting the Persian Gulf must pass, serving as the gateway for exports from major producers like Saudi Arabia, Iraq, Kuwait, Qatar, the United Arab Emirates, and Iran. According to the U.S. Energy Information Administration (EIA), disruptions in this essential route have immediate repercussions on the global economy. Flows through the Strait of Hormuz averaged 20 million barrels per day in 2024, accounting for about 20% of global liquid petroleum consumption. By the first quarter of 2025, the flows through Hormuz were expected to represent more than a quarter of global maritime oil trade and roughly one-fifth of global oil consumption. In response to this oil crisis exacerbated by ongoing military conflicts, the United States is set to release 172 million barrels of oil into the market to curb skyrocketing prices due to tensions, thereby attempting to stabilize the situation amidst fears that the conflict could persist. Related Sources: • Source 1 • Source 2