International oil prices experienced a significant surge on Monday, driven by a new round of military clashes between the US and Iran in the Strait of Hormuz. The global benchmark, Brent crude futures, rose by over 4%, reaching its highest level in nearly three weeks, triggering concerns about ripple effects on the global energy supply chain and Asian financial markets.
Data shows that as of 05:00 GMT on the 13th, the price for Brent crude futures for September delivery climbed to $79.26 per barrel, marking a new high since June 22nd of this year. Currently, international oil prices are approximately 9% higher than levels seen prior to the initial US-Israel military strikes against Iran in February.
This market volatility is directly fueled by the escalation of US-Iran geopolitical conflict. The US Central Command (CENTCOM) issued a statement accusing Iranian forces of intercepting a Cyprus well-known container ship in the Strait of Hormuz, leading to multiple US airstrikes on targets within Iran on Sunday, aimed at degrading its control over the strategic waterway. CENTCOM emphasized that US forces are prepared to respond to ensure freedom of navigation for commercial shipping. In response, Iran launched several missiles and drones towards the region on the same day. Iran's Persian Gulf Strait Authority subsequently reiterated that vessels navigating specific routes without authorization would not be guaranteed safe passage.
The intensified conflict has led to a sharp decline in commercial shipping traffic through the Strait of Hormuz. Monitoring data from maritime intelligence platform "Windward" shows that the number of commercial vessels passing through the strait recently plummeted to single digits, down from a daily average of 18 to 22 vessels earlier this month. Prior to the outbreak of conflict in the region, this critical waterway, which handles about one-fifth of global oil trade, saw an average daily traffic of approximately 130 vessels. Although the two sides signed a memorandum of understanding to end hostilities last month, the latest developments indicate that shipping order in the strait has once again ground to a halt.
Regarding future oil price trends, Mukesh Sahdev, founder and chief oil analyst at Sydney-based energy consultancy XAnalysts, stated that due to high geopolitical uncertainty, Brent crude prices are expected to remain volatile above $70 during August and September. He noted that as refiners tend to lock in forward supplies weeks in advance, this escalation will further reinforce the global market's trend of reducing its reliance on Middle Eastern crude.
IG Group market analyst Fabien Yip believes that although geopolitical risk premiums will provide short-term support for oil prices, the overall global oil market supply remains ample. This is due to a slow recovery in global demand, the gradual release of previously blocked tankers, and the ongoing production increase plans by "OPEC+". Therefore, the probability of oil prices repeating the sharp spike seen at the initial stage of the conflict is considered low.
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