Oil prices climbed above $100 a barrel today as the US navy prepared to block ships to and from Iran via the Strait of Hormuz, a move that could restrict Iranian oil exports, after Washington and Tehran failed to reach a deal to end the war.
Brent crude futures rose $6.67, or 7%, to $101.87 a barrel this morning after settling 0.75% lower on Friday. US West Texas Intermediate was up $7.26, or 7.5%, at $103.83 a barrel following a 1.33% loss in the previous session.
"The market is now largely back to conditions before the ceasefire, except now the US will block the remaining up to 2 million barrels per day Iranian-linked flows through the Strait of Hormuz as well," said Saul Kavonic, head of energy research at MST Marquee.
President Donald Trump said yesterday that the US Navy would start blockading the Strait of Hormuz, raising the stakes after marathon talks with Iran failed to reach a deal to end the war and jeopardising a fragile two-week ceasefire.
He added that the price of oil and gasoline may remain high through November's midterm elections, a rare acknowledgement of the potential political fallout from his decision to attack Iran six weeks ago.
"The mere threat of enforcement alone has been sufficient to re-price risk, demonstrating how vulnerable oil remains to geopolitical triggers," said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
"The return to triple-digit pricing, or the jump in a geopolitical risk premium that briefly faded during earlier ceasefire headlines, looks justified," Sachdeva added.
US Central Command said US forces would begin implementing the blockade of all maritime traffic entering and exiting Iranian ports later today.
It would be "enforced impartially against vessels of all nations entering or departing Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman," a CENTCOM statement on X said.
US forces would not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports, it added.
While the first round of negotiations failed to yield a breakthrough, the market is still betting on a Hormuz resolution before June, said SEB commodities chief analyst Bjarne Schieldrop in a note.
Iran's Revolutionary Guards said yesterday that any military vessels attempting to approach the Strait of Hormuz would be considered a violation of the two-week US ceasefire and be dealt with harshly and decisively.
Despite the stalemate, three supertankers fully laden with oil passed through the Strait of Hormuz on Saturday, shipping data showed. They appeared to be the first vessels to exit the Gulf since the ceasefire deal was struck last week.
Oil tankers are steering clear of the Strait of Hormuz ahead of the US blockade on Iran, shipping data on LSEG showed.
Saudi Arabia said yesterday it had restored full oil pumping capacity through the East-West pipeline to about 7 million barrels per day, days after providing an assessment of damage to its energy sector from attacks during the Iran conflict.
