Oil Prices Rise Amid Concerns Over Limited Supply Through the Strait of Hormuz

According to a report from Ukrinform, oil prices are demonstrating growth amid concerns that supply through the strategically important Strait of Hormuz will remain limited. As reported by the Reuters news agency, futures for Brent crude rose by $1.96, or 2.07%, to $96.71 per barrel. At the same time, the price of American West Texas Intermediate (WTI) crude increased by $2.60, or 2.75%, to $97.01 per barrel.

Both benchmark oil prices fell below $100 per barrel during the previous trading session, with WTI recording its largest drop since April 2020. This decline occurred against the backdrop of initial expectations that a ceasefire would lead to the full reopening of the Strait of Hormuz, a key route for oil transportation.

However, analysts point out that market participants are not rushing to completely dismiss the price risks associated with the geopolitical situation, and there is currently no clarity regarding the implications of negotiations between the United States and Iran for oil flows. "The chances for a meaningful restoration of operations in the Strait of Hormuz in the near term look capricious," stated Vandana Hari, founder of the oil market analysis firm Vanda Insights.

She also noted, "The futures market appears somewhat unstable. Otherwise, prices would have already returned to levels seen before the ceasefire." This indicates that the market remains influenced by external factors that could significantly impact prices.

The announced ceasefire is currently in question, as Israel continues to attack Lebanon, prompting Iranian leaders to suggest that continuing negotiations for a permanent peace agreement would be "unwise." This further heightens tensions in the region and raises concerns among market participants.

Additionally, shippers have indicated a need for greater clarity regarding the terms of the ceasefire before resuming transit through the Strait of Hormuz. "Logistical disruptions, security concerns, increased insurance premiums, and operational constraints mean that very few additional supplies are likely to be delivered through the Strait of Hormuz in the next two weeks," analysts at Standard Chartered noted.

The situation in the region remains tense, as oil facilities are also under threat. Iran has targeted facilities in neighboring countries following the announcement of the ceasefire, including a pipeline in Saudi Arabia that was used to bypass the blocked Strait of Hormuz. In turn, Kuwait, Bahrain, and the United Arab Emirates have also reported missile attacks and drone strikes, further complicating the situation.

It is worth recalling that previously, the United States, Israel, and Iran agreed to a two-week mutual ceasefire and the reopening of commercial shipping through the Strait of Hormuz. However, given the current situation, questions arise as to whether this agreement can be practically implemented.

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