The US-Iran war has resulted in a physical chokepoint, taking offline part of the supply of oil and gas due to the closure of the Strait of Hormuz. Recently, Brent crude futures slumped 14.43%, hitting an intraday low of $96 per barrel, while WTI crude futures tanked 14.25%, reaching $84.23 per barrel. This dramatic plunge follows a significant geopolitical development: President Donald Trump announced a halt to military strikes on Iranian power plants and energy infrastructure.
Trump stated, “I am pleased to report that the United States of America and the country of Iran have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.” He further instructed the Department of War to postpone any military actions for a five-day period, contingent upon the success of ongoing discussions.
The abrupt decline in crude oil prices comes after a month where Brent crude prices had surged approximately 46%. The current situation has raised concerns among analysts and officials regarding the stability of global oil markets. The International Energy Agency (IEA) has assessed this episode as the largest supply disruption in the history of the global oil market.
As the conflict continues, the closure of the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas flows, has severely impacted shipping routes. Flows through the strait have collapsed from 20 million barrels per day to a trickle, prompting fears of further price increases.
Saudi Arabia has forecasted that oil prices could soar to $180 per barrel if the war persists beyond April. Additionally, Qatar’s Energy Minister has warned that Brent could reach $150 under the current circumstances. Observers note that the longer the war continues and the disruption through the strait remains, the longer oil and gas prices will stay elevated.
In light of these developments, the US is actively working to reopen the Strait of Hormuz for energy shipments, as Iran had previously shut the strait in response to US and Israeli strikes. The situation remains fluid, and details are still unfolding as negotiations continue.
