Oil prices jumped more than 4% in Asian trade on July 13 after fresh military action between the US and Iran raised concerns over global oil supplies. Traders also kept a close watch on developments in the Strait of Hormuz.
Brent crude futures climbed 4.08% to AED 290.55 ( $79.11) a barrel in early trade. US benchmark West Texas Intermediate (WTI) also rose 4.11% to AED 273.11 ($ 74.36) a barrel. Brent crude reached its highest level in more than three weeks. The rise reflected growing concerns over security risks in the Middle East.
The latest surge followed a weekend of renewed military strikes between the US and Iran. US forces carried out another round of attacks on multiple Iranian targets on July 12, according to US Central Command.
Iran responded with missile attacks targeting US military bases in Kuwait and Bahrain, the country's Revolutionary Guards said on July 13. Earlier reports also indicated strikes involving other US allies in the region, including Qatar, Jordan, and Oman.
The renewed hostilities have also revived uncertainty over shipping through the Strait of Hormuz. Iran claimed the strategic waterway had been closed to traffic. The US maintained that commercial navigation through the route continued. The Strait of Hormuz carries nearly 20% of the world's oil and liquefied natural gas shipments under normal conditions. Any disruption has an immediate impact on global energy markets.
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Ship-tracking data from Kpler showed only six vessels crossed the Strait of Hormuz on July 12. That marked the lowest daily traffic in five weeks and added to concerns over near-term oil supplies. Commodity analysts noted that the latest developments have weakened expectations of a quick easing in regional tensions. ANZ analysts said the weekend escalation has cast fresh doubt over hopes for a near-term resolution.
ING commodity strategists Warren Patterson and Ewa Manthey stated that slower vessel movement through the strait has renewed concerns over tighter oil supplies during the third quarter. They also warned that any expansion of the conflict could increase risks for neighbouring countries and energy infrastructure.
The latest military action has created fresh uncertainty over the interim agreement between the US and Iran. The two countries signed the agreement last month. It aimed to reopen the Strait of Hormuz. It also provided 60 days for further negotiations. The International Energy Agency said global oil supply increased by 4.1 million barrels a day in June. Oil production was still 9.4 million barrels a day below pre-war levels.
Higher oil prices also affected financial markets. Stock and bond markets in Asia and Europe fell on July 13. Investors worried about a longer disruption to oil shipments. Analysts confirmed that traders still expect the conflict to stay under control. Even so, uncertainty over the Strait of Hormuz continues to influence global energy markets.