Oil and natural gas prices soared after the US Navy seized an Iranian ship during a chaotic weekend that saw Tehran firing at vessels and reimposing controls in the Strait of Hormuz.
Brent jumped as much as 7.9 per cent, erasing most of its declines on Friday after a reopening of the key waterway was announced, while US oil jumped 7.2 per cent. European gas increased as much as 11 per cent. Tehran on Sunday (AEST) again closed the choke point, after it said a US blockade of Iran-linked ships violated a ceasefire agreement that ends this week.
President Donald Trump said the US Navy fired upon and seized the ship in the Gulf of Oman after it failed to heed warnings to stop as it left Hormuz, the first major encounter in the week-old blockade. The incident came hours after a back-and-forth over potential peace talks in Islamabad, with Trump saying he saw a chance for a deal and Iranians saying there was no “clear prospect” of an agreement.
“The market’s still carrying a risk premium into the deadline but just not fully committing to it,” said Haris Khurshid, chief investment officer at Karobaar Capital LP in Chicago. “If things just continue as they are, you probably see a gradual push higher to around $US105 [$147] to $US115, but with a lot of back and forth on headlines.”
The standoff over Hormuz – through which about a fifth of the world’s oil and liquefied natural gas flowed before the US-Israeli war on Iran began at the end of February – threatens to deepen the global energy crisis and is undermining Trump’s weekend prediction of a quick end to the conflict. The waterway is just one of the unresolved issues, which also include Iran’s nuclear capabilities and Israel’s ongoing invasion of Lebanon.
Bloomberg
