Crude Oil Prices Rise Over 1% As Iran-Oman Strait Of Hormuz Proposal Sparks Supply Concerns

Oil prices continued their upward movement on Friday as markets remained concerned about possible disruptions to shipping through the Strait of Hormuz amid escalating tensions involving Iran and the US.

Brent crude futures gained 99 cents, or 1.2%, to $83.48 per barrel, while US West Texas Intermediate (WTI) crude futures climbed 85 cents, or 1.1%, to $78.84 per barrel.

Iran-Oman Proposal Fuels Strait Of Hormuz Concerns

The rise in crude prices followed reports that Iran, with Oman’s involvement, was considering restrictions on vessels classified as hostile passing through the strategically important Strait of Hormuz.

The proposed legislation under review by an Iranian parliamentary committee could prevent US, Israeli and other vessels deemed unfriendly from using the waterway. The proposal also includes penalties of up to 20% of a cargo’s value for ships violating the restrictions.

The Strait of Hormuz is a crucial global energy route, handling nearly one-fifth of the world’s oil and liquefied natural gas (LNG) trade before the latest conflict intensified.

Iran is also reportedly seeking transit fees of 5-7% of cargo value from vessels using the route, while Oman is discussing a possible fee of around 3%. However, the US has pushed for unrestricted shipping access without additional charges.

Industry experts said implementing such an arrangement could face challenges due to existing US sanctions and restrictions related to insurance and payment mechanisms.

Oil prices had earlier declined during the week on hopes of diplomatic progress between the US and Iran. However, renewed concerns over shipping restrictions pushed Brent crude back above the $80-per-barrel level after it briefly fell below that mark earlier.

Adding to geopolitical concerns, Yemen’s Iran-aligned Houthi rebels claimed responsibility for missile and drone attacks targeting Saudi forces in the Marib and Hadramout regions.

The possibility of tighter shipping restrictions comes at a time when markets are already sensitive to geopolitical risks, making crude prices vulnerable to further swings depending on developments in the Middle East.