Oil Prices Climb as Iran Considers New Restrictions for Strait of Hormuz

Oil prices extended gains on Friday amid investor concerns over a new Iranian proposal to restrict passage and impose fees on vessels transiting the Strait of Hormuz, a critical chokepoint for global energy supplies. The move introduces fresh uncertainty into a market already sensitive to geopolitical tensions in the Middle East.

By 0010 GMT, Brent crude futures had risen 1.2%, or 99 cents, to $83.48 a barrel. U.S. West Texas Intermediate (WTI) futures were up 1.1%, or 85 cents, at $78.84 a barrel. The gains followed a session on Thursday where both benchmarks settled up by more than $3 a barrel.

Details of the Proposal

An Iranian parliamentary committee is reviewing a preliminary bill that could significantly alter transit rules for the strait, through which roughly a fifth of the world's oil and liquefied natural gas has historically passed. According to Iran's Fars news agency and a senior Iranian official, the proposed measures include:

• A ban on U.S., Israeli, and other vessels deemed "hostile."
• Fines for violators of up to 20% of their cargo's value.
• A transit fee of between 5% and 7% of the cargo's value for other ships using the strait.

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Oman, which is working with Iran on the plans, is reportedly discussing a lower fee of around 3%, while Washington has maintained that it wants no fees imposed. However, four industry sources cited by Reuters said the proposed deal faces significant hurdles, including existing U.S. sanctions and restrictive insurance clauses on any such payments.

Market Reaction and Analysis

The potential for new shipping disruptions has put a floor under prices, with benchmark Brent breaching the $80 threshold on Thursday for the first time since July 13. Market sentiment remains cautious, with analysts noting the difficulty in implementing and sustaining such an agreement.

"Markets have already seen at least one short-lived arrangement earlier this year, so confidence that a new pact would fully restore normal tanker movements remains low," said Tim Waterer, chief market analyst at KCM Trade. This skepticism is contributing to the price support, as traders price in the risk of continued instability in the key waterway. Adding to regional tensions, Yemen’s Houthis claimed on Thursday to have carried out missile and drone attacks on Saudi positions in Yemen.