Oil prices experienced a significant increase overnight. As of the close on the 17th, the price of light sweet crude oil futures for August delivery on the New York Mercantile Exchange rose by $3.54 per barrel to settle at $82.49, a gain of 4.48%. Brent crude futures for September delivery on the Intercontinental Exchange increased by $3.87 per barrel to close at $88.10, marking a 4.59% rise.
The ongoing conflict in the Middle East continues to impact the region, with vessel traffic through the Strait of Hormuz weakening. Here are the latest developments.
Iran's Revolutionary Guard Corps Reports Explosions and Fires Involving Two Tankers
According to reports, Iran's Islamic Revolutionary Guard Corps issued a statement on the 18th stating that two oil tankers caught fire and exploded while passing through a mined area in the southern part of the Strait of Hormuz.
The statement emphasized that, due to recent US military actions, the Strait of Hormuz is now "completely closed." It declared that oil and gas transportation through the strait cannot proceed until the US halts its military operations against Iran, and advised vessels to avoid the mined zones. The statement did not specify the nationality of the tankers or details regarding casualties and damages.
US Launches New Strikes as Explosions Reported Across Iran
Reports indicate that explosions were heard in multiple locations across Iran in the early hours of the 18th. Blasts were reported in the southern suburbs of Lar city in Fars province, and five explosions were heard around the central city of Yazd, with local residents reporting the sound of fighter jets.
A deputy governor of Yazd province stated that US warplanes launched an attack, with five missiles landing in areas around the provincial capital, Yazd. No casualties have been reported so far, and the local situation has reportedly returned to calm.
A deputy governor of Khuzestan province in southwestern Iran stated that the US military targeted some locations around the provincial capital, Ahvaz.
Additionally, Lar and Darab cities in Fars province were reportedly hit by US missile strikes, with explosions heard in both areas. A location in the southern port city of Bandar Abbas was also targeted.
US Military Confirms New Round of Strikes Against Iran
The US Central Command stated on the 17th that US forces initiated a new round of strikes against Iran at 3:00 PM Eastern Time, marking the seventh consecutive night of US airstrikes.
The US Central Command stated that this action was conducted under the direction of the President and aims to continue degrading Iran's military capabilities.
Israeli Airstrike on Gaza Refugee Camp Kills 8
According to reports, an Israeli airstrike targeted the Nuseirat refugee camp in central Gaza on the 17th, killing at least eight people and injuring 20 others.
The report stated that the strike hit a crowd attending a funeral. Witnesses described scenes of chaos and panic, with the dead and wounded transferred to a nearby hospital.
Hamas issued a statement condemning the attack, calling it another heinous crime and accusing Israel of continuous and systematic violations of the Gaza ceasefire agreement.
Strait of Hormuz Traffic Hits Three-Week Low
Data released on the 17th shows that vessel traffic through the Strait of Hormuz continued to weaken on the 16th, with the number of confirmed transits dropping to eight vessels, the lowest level in nearly three weeks.
The data indicated that seven of the eight vessels that passed through the strait that day chose the shipping lane on the Iranian side. This reflects a further concentration of traffic in this lane as shipping companies reassess regional security, crew safety, and insurance risks.
The naval branch of Iran's Islamic Revolutionary Guard Corps issued a statement on the 18th claiming that, within the past few hours, four "violating" vessels attempting to pass through the Strait of Hormuz with US support were all intercepted in a combined missile and drone operation. The statement warned vessel owners to heed the warnings and declarations issued by the Revolutionary Guard Corps Navy.
International Energy Agency Warns of Global Energy Security "Red Alert"
The head of the International Energy Agency warned on the 16th that global energy security could face a "red alert" if oil transit through the Strait of Hormuz is not restored within weeks.
Speaking at an event, the IEA Executive Director stated that oil supply security remains a critical issue. He expressed concern that if the situation at the Strait of Hormuz does not improve in the coming weeks, the world should be worried. He noted that some countries' coping measures "cannot last forever," and even a significant increase in US oil production would be far from sufficient to compensate for the supply gap caused by Strait of Hormuz disruptions.
He also pointed out that the oil supply crisis is impacting the global economy, with high oil product prices forcing some populations in developing countries to switch to alternative fuels like firewood, whose harmful emissions pose health threats to local residents.
Analysts Maintain Bullish Outlook for Oil Prices
Domestic crude oil futures prices fell during the day session, giving back some of the week's gains. By the close, the main contract for Shanghai crude futures settled down 1.22% at 510.5 yuan per barrel.
Earlier in the week, escalating US-Iran tensions and shipping disruptions in the Strait of Hormuz had driven both domestic and international oil prices up by about 10%. Analysts cited changing expectations regarding the geopolitical situation and weekend risk-off sentiment as the main reasons for the domestic price pullback.
An energy and chemical analyst stated that after the recent consecutive price rebounds, the market itself faced correction pressure. Coupled with the weekend market closure, concerns over potential overnight risks from changes in the US-Iran situation led some funds to take profits.
However, the situation shifted during the night session on the 17th, with both domestic and international oil prices rising significantly. Domestically, the main Shanghai crude futures contract settled up 5.23% at 542.9 yuan per barrel.
Although the pace of gains slowed later in the week, interviewed analysts generally maintain a bullish or range-bound outlook for oil prices. Firstly, the US-Iran situation remains the primary driver for oil market pricing. Deep-seated differences between the US and Iran over control of the Strait of Hormuz, asset unfreezing, and nuclear issues make negotiations difficult, with bilateral friction likely to recur. Should tensions escalate again, attention may shift to the security of shipping through the Bab el-Mandeb Strait.
Secondly, the risk of a Strait of Hormuz blockade is being gradually priced into the market. A senior analyst noted that the strait handles about one-fifth of global crude oil trade, and the disruption to its traffic is already a reality. Current shipping activity remains far below normal levels. While diplomatic efforts continue, the market is already trading with a significant geopolitical risk premium. Signs of disruption at the Bab el-Mandeb Strait could push prices even higher.
Finally, the global crude oil supply and demand fundamentals are tightening. An analyst explained that compared to March this year, the buffer provided by floating storage and the US Strategic Petroleum Reserve has significantly diminished. If transit through the Strait of Hormuz remains obstructed for an extended period, global crude inventories will continue to draw down. Simultaneously, refined product inventories in various regions remain low, with cracking margins staying high, providing underlying support for crude oil prices.
Another energy and chemical analyst stated that, considering the gradual recovery of Middle Eastern oil production, extreme price movements are unlikely in the near term, with short-term trends swaying with geopolitical developments. In the longer term, attention should be paid to the potential substitution effect of increased production from the UAE on OPEC+ supply, which could lead to a degree of uncoordinated output increases.
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