On Monday, oil prices were up 7%, after the Strait of Hormuz was again shut down. This shift follows an extremely tense weekend in which the U.S. seized a shipload and Tehran shut down the passageway.
Key Highlights
- Brent crude rose 7% to $96.85 a barrel.
- U.S. oil (WTI) went up by 7% to $90.38 a barrel.
- The shipping route reopened for a 12-hour period, but was closed within hours of opening.
- The U.S. military captured an Iranian cargo vessel for violating the blockade.
- Iran firmly rejects new peace talks with the United States
An Unexpected Spike in Oil Prices Around the World
On Monday morning, global oil prices soared sharply to offset the price drop late last week. Brent crude futures rose 7% to $96.85 a barrel, while U.S. oil (WTI) increased by 7.79% to $90.38. And that was the result of the Strait of Hormuz being closed down. For Australia, this could put an abrupt end to the latest trend of falling fuel prices.
Why the Oil Price Increased Again
The price spike is mainly a consequence of the more intense deterioration of trust between the United States and Iran. The sea route was opened for roughly twelve hours on Friday, but closed on Saturday night after both sides blamed each other for new attacks. President Donald Trump said on Sunday that the U.S. Navy seized an Iranian cargo ship after opening fire on its engine room when it failed to heed a blockade order from U.S. warships Since then, Iran has responded by not entering into any new peace talks, even with the United States talking about more air strikes.
Washington maintains a Naval blockade of Iranian ports and Iran says it will keep the Strait of Hormuz shut unless such a blockade is lifted. Even after some tankers turned back, experts suggest that at least 20 vessels crossed in the night. Markets responded cautiously to this, fearing that the eight-week-old war would continue to disrupt global energy supply.
What This Means for Future Price
Oil prices will keep swinging until the shipping route is no longer a hotspot of conflict, experts said. Some analysts believe the oil could still be higher towards $105 or even $115 a barrel if the two sides fail to reach an agreement soon. As of now, most attention is on whether the proposed meeting in Pakistan will still take place or whether the truce will expire by Wednesday. In the meantime, with world oil prices creeping back up, households and businesses throughout the globe can expect to pay extra for transport and shipping.
FAQs
- What drove the 7% price move in oil on Monday?
Prices went up after the Strait of Hormuz was again closed for a very short time.
- Is Iran going for peace talks this week?
Iran’s state media say the country has ‘no intention’ of new talks after tensions and ship seizure
- Will the petrol prices for Australia be affected?
Yes, because Australia’s oil price depends on global oil prices.
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