Crude oil prices made a notable upswing on Thursday, edging closer to the $100-per-barrel threshold following fresh disruptions in the Strait of Hormuz and renewed uncertainties surrounding the fragile US-Iran ceasefire, reigniting concerns about supply. Brent crude saw a 2.48% increase, reaching $97.10 per barrel, while US West Texas Intermediate (WTI) surged by 3.43% to $97.65, marking a significant turnaround from the previous session’s decline when prices had dipped to approximately $90.
This sudden rebound underscores the swift shift in sentiment within a day, with geopolitical risks once again taking center stage. Vessel traffic through the Strait of Hormuz has been disrupted anew, with tankers that had started to leave the area now reversing course. Despite a brief resumption of movement following the ceasefire announcement, the situation quickly deteriorated. Shipping data reveals that over 1,000 vessels, including nearly 200 fully loaded tankers, are currently present in the region, and even under normal transit conditions, it would take weeks to clear the backlog.
Any interruption in the strait, a vital oil chokepoint globally, could exacerbate delays and further tighten expectations for global supply. The ceasefire, which initially pacified markets, is now exhibiting signs of strain as escalating tensions in West Asia raise doubts about its sustainability. This development has reintroduced a geopolitical risk premium to crude oil, undoing the optimism that had pushed prices lower just a day prior.
The resurgence in crude oil prices poses a significant concern for major oil-importing economies like India. Elevated prices have the potential to stoke inflation, exert pressure on currencies, and impact corporate profit margins, with potential ripple effects across financial markets. Given the ongoing fluidity of the situation, oil markets are expected to remain highly volatile. Should disruptions persist in the Strait of Hormuz or if the ceasefire further weakens, crude oil prices could once again approach or breach the $100 threshold.