Oil prices rise after the US says it would block Iranian ports starting Monday
NEW YORK (AP) — Oil prices rose in early trading Sunday after the U.S. said it would Blockade Iranian ports starting from Monday.
The barrel price of US crude oil increased by 8 percent to 104.24 dollars, and the price of Brent crude oil, which is the international standard, increased by 7 percent to 102.29 dollars.
Brent crude experienced a dramatic surge during the Iran war, rising from roughly $70 per barrel before the war to over $119 per barrel in late February. On Friday, before peace talks, Brent for June delivery fell 0.8% to $95.20 per barrel.
Iran effectively controls Strait of HormuzAn important waterway for global oil transportation.
U.S. Central Command said the blockade “shall be enforced on a neutral basis against ships of all nations” entering or leaving Iranian ports and coastal areas, including all Iranian ports in the Persian Gulf and Gulf of Oman.
Ships traveling between ports outside Iran will still be allowed to pass through the Strait of Hormuz, he said.
Approximately one-fifth of the oil traded in the world passes through the Strait of Hormuz every day. Saudi Arabia, Iraq, United Arab Emirates, Kuwait and Iran are the main exporters.
Even on the days when the ceasefire was declared, traffic in the Bosphorus was limited. Maritime trackers say more than 40 merchant ships have transited since the beginning of the ceasefire.
Claudio Galimberti, Rystad Energy’s chief economist, said the blockade would increase prices but could direct talks.
“This means oil markets will be even tighter than before,” he said. “But I think this is a negotiating tactic that will eventually result in the full opening of Hormuz. So more pain now, but more gain later.”
But Rice University Energy Research Fellow Jim Krane said that while the blockade could be effective as a long-term strategy to hurt Iran’s economy, it is not a good short-term negotiating tactic when the oil market is already under pressure.
“If the oil market deficit increases once again, it will cause pain to every person in the world who is subject to oil prices in the market,” he said.
