Oil Prices Climb as Strait of Hormuz Traffic Halts Amid Escalating Iran Tensions

Oil prices advanced on Monday, extending a strong weekly rally as escalating geopolitical tensions in the Middle East brought commercial shipping through the critical Strait of Hormuz to a virtual halt over the weekend.

As of 5:14 AM ET, the international benchmark Brent crude futures rose 0.9% to $89.28 per barrel, while U.S. West Texas Intermediate (WTI) crude futures traded 0.2% higher at $82.60 per barrel. The gains build on a more than 5% surge for Brent last week, driven primarily by the ongoing standoff between Iran and the U.S. following attacks on energy infrastructure in the Gulf region.

Chokepoint Disruption Fuels Supply Fears

The primary driver for the price increase is a severe disruption at the Strait of Hormuz, a vital chokepoint for global energy supplies. Iranian attacks on tankers and a U.S. naval blockade have choked off traffic, with shipping data from Kpler, cited by Reuters, showing a dramatic decline:

• Sunday: Zero cargo ships passed through the strait.
• Saturday: Only five ships transited the waterway.
• Previous Weekend: A total of 31 vessels passed through.
• Pre-conflict: Before joint U.S.-Israeli military action began in late February, the strait saw over 130 vessels per day.

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The effective closure of this route raises significant concerns about near-term supply availability for both crude oil and liquefied natural gas (LNG).

Market Overlooks Weaker Demand Forecasts

Analysts noted that fears of a wider supply shock are currently overshadowing weaker global demand forecasts recently issued by OPEC and the International Energy Agency (IEA). According to a note from ING analysts, continued attacks in the strait are "sparking fears of regional supply disruptions and further complicating the outlook for a U.S.-Iran deal."

The diplomatic situation remains tense, with Iran's foreign minister reiterating that Tehran is not engaged in direct talks with Washington, which has threatened further economic sanctions. Analysts at ANZ also highlighted that refined products, particularly diesel, are more acutely affected than the broader crude market, citing a combination of refinery outages, shipping constraints, and the ongoing Russia-Ukraine war as tightening factors.