World
Oil prices steady as Strait of Hormuz crossings ease supply fears, Australia watches closely
Oil prices closed little changed after reports that vessels resumed crossing the Strait of Hormuz, easing some supply fears tied to the Iran war. However, attacks on ships and geopolitical risks continued to keep energy markets on edge.
Oil prices ended nearly unchanged on Thursday after reports that dozens of vessels crossed the Strait of Hormuz, helping ease immediate concerns over global supply disruptions during the ongoing Iran war. Brent crude settled up 9 cents, or 0.09 per cent, at $105.72 a barrel, while US West Texas Intermediate crude rose 15 cents, or 0.15 per cent, to finish at $101.17 a barrel.
Key highlights
- Brent crude settled at $105.72 a barrel
- WTI crude ended at $101.17 a barrel
- Iran said around 30 vessels crossed the Strait of Hormuz
- Security incidents involving ships kept supply fears elevated
- China and the US agreed the strait should remain open
- Analysts warned oil prices may remain volatile
What happened?
Oil prices initially climbed after geopolitical tensions in the Middle East continued to disrupt energy markets.
However, sentiment improved after Iranian state media reported that about 30 vessels had crossed the Strait of Hormuz since Wednesday evening.
The Strait of Hormuz is one of the world’s most important energy shipping routes and normally handles roughly one-fifth of global oil supply.
Brent crude touched an intraday high of $107.13 before retreating. The benchmark spent much of the trading session in negative territory as traders reassessed supply risks.
The market also reacted to reports that both US President Donald Trump and Chinese President Xi Jinping agreed the Strait of Hormuz should remain open to global energy flows during talks in Beijing.
Security concerns remain elevated
Despite some vessel movement through the strait, tensions in the region remained high.
An Indian cargo ship carrying livestock reportedly sank off the coast of Oman, while British maritime security agency UKMTO said unauthorised personnel boarded a ship near Fujairah in the United Arab Emirates and redirected it toward Iran.
Iran has also tightened oversight of the strait and reportedly struck shipping agreements with Iraq and Pakistan to move oil and liquefied natural gas exports through the region.
According to Iranian media reports, some Chinese vessels have now been allowed to transit the waterway.
A Chinese supertanker carrying Iraqi crude and a Japan-linked tanker managed by Eneos Holdings were among the ships that recently crossed the strait.
What it means for Australia
Australia is highly exposed to global oil market disruptions because it imports a large share of its refined fuel requirements.
Higher oil prices could increase fuel costs, freight expenses and inflationary pressures across the Australian economy.
The ongoing Iran conflict has already raised concerns among policymakers and businesses about energy security and supply chain disruptions.
Australian motorists and businesses may continue facing elevated fuel prices if instability in the Strait of Hormuz persists.
Energy analysts also warn that prolonged supply disruptions could complicate the Reserve Bank of Australia’s inflation outlook and interest rate path.
Why investors remain cautious
Analysts said the limited reopening of shipping lanes has improved short-term market sentiment, but risks remain major.
Tim Snyder, chief economist at Matador Economics, said traders are closely watching whether Iran’s willingness to allow some vessels through the strait is linked to ongoing diplomatic talks involving China.
PVM analyst Tamas Varga said the increase in vessel crossings could temporarily cap oil prices but was unlikely to trigger a major decline.
Meanwhile, the International Monetary Fund warned that the global economy is moving toward an “adverse scenario” because of the conflict and energy disruptions.
The International Energy Agency also said global oil supply is expected to fall short of demand this year as inventories decline rapidly.
Other market developments
The US Energy Information Administration said US crude inventories fell by 4.3 million barrels last week due to stronger exports.
At the same time, investors remained concerned about inflation and interest rates after recent economic data strengthened expectations that central banks may keep monetary policy tighter for longer.
Oil markets have also been influenced by broader geopolitical developments, including ongoing negotiations between the United States and China.
FAQs
Q1: Why is the Strait of Hormuz important?
The Strait of Hormuz is a critical global shipping route connecting the Persian Gulf to international markets. Around 20 per cent of global oil supply typically passes through the strait.
Q2: Why did oil prices remain steady despite tensions?
Oil prices stabilised after reports that some vessels resumed crossing the Strait of Hormuz, easing immediate fears of a total supply shutdown.
Q3: How does this affect Australia?
Australia could face higher fuel prices and inflation if oil supply disruptions continue, as the country relies heavily on imported fuel products.
Q4: What are analysts expecting next?
Analysts expect oil prices to remain volatile as markets monitor geopolitical tensions, shipping activity and global energy supply conditions.
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