The US-Iran war has resulted in a physical chokepoint, taking offline part of the supply of oil and gas due to the closure of the Strait of Hormuz. Recently, Brent crude futures slumped 14.43% to hit an intraday low of $96 per barrel, while WTI crude futures tanked 14.25% to reach an intraday low of $84.23 per barrel. This sharp decline follows the announcement that the US has halted military strikes on Iranian power plants.
Crude oil prices plunged over 14% after President Donald Trump stated, “I am pleased to report that the United States of America and the country of Iran have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.” He further indicated that military actions would be postponed for five days, contingent on the success of ongoing discussions.
Despite the recent drop, Brent crude prices are still up around 46% so far this month, reflecting the volatility and uncertainty in the energy market. The closure of the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas flows, has severely impacted supply chains.
Saudi Arabia has forecast that oil prices could hit $180 if the conflict continues beyond April, while Qatar’s Energy Minister warned that Brent could reach $150. The International Energy Agency (IEA) has assessed that the current episode represents the largest supply disruption in the history of the global oil market.
Flows through the Strait of Hormuz have collapsed from 20 million barrels per day to a trickle, exacerbating the situation. Gulf production cuts of at least 10 million barrels per day have further tightened the market.
As the US attempts to reopen the Strait of Hormuz for energy shipments, the situation remains precarious. Observers note that the longer the war continues and the longer the free transit through the strait remains disrupted, the longer the prices of oil and gas will remain high. The war has damaged major energy facilities in the Gulf and nearly halted shipping through the Strait of Hormuz.
Details remain unconfirmed.
