Oil prices jump on US plans to blockade Iranian ports in Strait of Hormuz
By Hanna Ziady, CNN
London (CNN) — Oil prices climbed Monday, after the US military said it would implement a shipping blockade in the Strait of Hormuz — a move that could test the current ceasefire while further tightening global oil supply.
Brent crude, the global oil benchmark, rose 7% to near $102 a barrel — a gain of 40% since the start of the war. WTI, the US benchmark, climbed by a similar margin to $103.5 a barrel, around 54% higher than it was before the war effectively shuttered the Strait of Hormuz.
The United States Central Command, part of the US Department of Defense, said Sunday that naval forces would begin a blockade of “all maritime traffic entering and exiting Iranian ports” from Monday at 10 a.m. ET. “CENTCOM forces will not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports,” it added in a statement.
The maritime blockade, which lines up with President Donald Trump’s threat, comes after the United States and Iran failed to agree terms to end the war during weekend talks. Tehran, which has reportedly been tolling some ships seeking transit through the Strait of Hormuz, has vowed to retaliate against any military vessels in the strait.
The move “risks creating new potential flashpoints,” in the conflict, Capital Economics chief economist Neil Shearing wrote in a note Monday. “Would the US Navy seize allied ships that have paid tolls to Tehran? Would it target Chinese vessels in the Strait? Either outcome would represent a significant escalation,” he added.
The blockade will also “cause additional tightening in global oil markets,” Shearing noted. “Iran accounts for roughly 4% of world supply, much of which is exported to China.”
By blocking Iranian oil exports, Trump could cut off a crucial source of funding for Iran’s government and military operations. Iran’s oil exports were equal to around $45 billion last year, or 13% of Gross Domestic Product (GDP), according to Shearing.
And Tehran has been exporting even more oil since the war started. Iran’s oil exports averaged around 1.85 million barrels a day through March, about 100,000 barrels a day more than the average between December and February, according to data and analytics firm Kpler.
Stock markets wobbled Monday, with S&P 500, Dow and Nasdaq futures pointing to a weaker open. In Asia, most major markets closed modestly lower with major European indexes also trading down.
One notable exception was Hungary’s flagship BUX index, which gained nearly 3% in Budapest following national elections that ended Prime Minister Viktor Orbán’s 16-years in power. With nearly all the votes counted, Péter Magyar, leader of the center-right opposition Tisza party, is on track for a landslide victory.
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