Oil Prices Surge as Iran Considers Banning US, Israeli Ships From Strait of Hormuz

Oil prices continued a strong rally in Asian trading on Friday, reversing earlier weekly losses as renewed geopolitical tensions in the Middle East put a critical supply chokepoint back in focus. The gains were fueled by reports that Iran is considering legislation to prohibit U.S. and Israeli-linked vessels from passing through the Strait of Hormuz.

Geopolitical Risk Reignites

During Asian hours, Brent crude futures for October delivery rose 1.4% to $83.65 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.3% to $78.26 per barrel. This follows a significant rally in the previous session, where both benchmarks jumped by approximately 3% to 4%.

According to media reports, a committee in Iran's parliament is reviewing a bill that would ban U.S. and Israeli ships from the strait, with potential fines of up to 20% of a vessel's cargo value for violations. The reports were compounded by a statement from Iran's Islamic Revolutionary Guard Corps claiming it had conducted strikes against "hostile targets" within the waterway. The Strait of Hormuz is a vital artery for global energy markets, responsible for the transit of about one-fifth of the world's oil and liquefied natural gas (LNG).

Market Reverses Course

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The developments mark a sharp reversal from earlier in the week, when oil prices had fallen on optimism that a deal between Tehran and Oman could restore normal passage through the strait. That optimism faded as details suggested any potential agreement might exclude U.S. and Israeli ships, bringing supply risks back to the forefront for traders. Despite the recent rebound, both Brent and WTI remain on track for a weekly loss of more than 7%.

Broader regional instability is also providing support for prices. Iran-backed Houthi forces in Yemen claimed attacks on Saudi military positions, raising concerns about shipping security in the Red Sea. Separately, a reported Ukrainian drone attack caused a fire at a major Russian oil refinery, adding to global supply anxieties.

Economic Data in Focus

Investors are now looking ahead to the U.S. non-farm payrolls report, due later on Friday, for signals on the Federal Reserve's future interest rate policy. Persistently high interest rates could slow economic activity and, in turn, curb demand for fuel, potentially acting as a headwind for oil prices.