Oil Gains Only Gains 1% Despite Middle East Escalation
The oil market has reacted only moderately after a weekend of sharp escalation in the Middle East conflict. First, the United States launched airstrikes on Iran’s nuclear facilities, and then the Iranian parliament approved a blockade of the Strait of Hormuz. Brent and WTI crude opened 5% higher after the weekend, reaching their highest levels since early January, but much of the gains have now been erased. Just over an hour before the opening of European markets, Brent crude is trading at just under $78 per barrel, while WTI is below $75 per barrel. The increase in oil prices has fallen from 5% to just 1%. The limited movement in the oil market is related to the lack of actual action in the Strait of Hormuz. Iran has not imposed a physical blockade or attacked any vessels, and what’s more, there has been no attack on American positions in the vicinity of Iran.
Oil is gaining about 1%, but earlier opened with a 5% gap at $78 per barrel. Source: xStation5
At the moment, tankers are still passing through the strait normally, using the territorial waters of Oman and the United Arab Emirates. However, further escalation of the situation cannot be ruled out. The United States is currently calling for quick peace talks, which seems unlikely. The United States has also asked China to verbally intervene so that Iran does not decide to take actual action in the Strait of Hormuz. Around 20% of the oil supply passes through the Strait of Hormuz, mainly from Saudi Arabia, Kuwait, Iraq and the United Arab Emirates, but also Iran. Equally important, most of this oil goes to Asian countries, mainly China.
Ships are still passing through the strait, although many are in the roadstead. Source: VesselFinder.Com
After the strong escalation of the conflict, there is also no significant movement in other markets. Gold gained less than 1% at the opening, but is currently losing about 0.3%, and EURUSD is back above 1.1500
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