(March 13): Brent oil traded near US$100 ($127.85) a barrel on Friday following one of the most volatile trading weeks ever, with investors bracing for more upheaval as Iran pledged to keep the Strait of Hormuz effectively shut.
The global oil benchmark was modestly lower after rising 9.2% on Thursday, while West Texas Intermediate (WTI) traded near US$96, following a week of dramatic fluctuations. In his first public comments since succeeding his father, Iran’s new supreme leader Mojtaba Khamenei said the Islamic Republic would seek to ensure the critical waterway for crude and natural gas stays closed.
In a further effort to try and tame surging prices, the US granted a temporary waiver for the purchase of Russian oil that was loaded onto vessels before March 12. The latest measure is broader than a directive earlier this month, when only India was cleared to increase its purchases.
The International Energy Agency (IEA) warned on Thursday that the supply disruption is the largest in the history of the global oil market, a day after its members agreed to a historic release of emergency reserves to try and cool prices. US President Donald Trump also struck a defiant tone, offering little relief to energy markets as the war in Iran nears its third week.
The near-halt to shipping through the narrow Strait of Hormuz near Iran and the Arabian Peninsula has choked off shipments of crude, natural gas and products such as diesel to global customers, driving up energy prices. It’s raised fears of an inflation crisis and is starting to hit some economies.
“This is the most important oil supply disruption event since 1970s,” said Philip Jones-Lux, a senior market analyst at Sparta Commodities, referring to previous Middle East supply shocks. The IEA release helps to keep prices from going to “stratospheric levels”, but probably only for a short period, he added.
See also: Iran escalates attacks on shipping and Dubai, sending oil higher
Iran has likely started laying mines in the strait, according to the UK, which will make shipping even more perilious for those considering passing through the waterway. Since the war began on Feb 28, vessel traffic has slowed to a trickle through the channel, including Iranian tankers carrying oil.
The US Navy could start escorting tankers through Hormuz by the end of the month, Energy Secretary Chris Wright said on CNBC, while Treasury Secretary Scott Bessent told Sky News that he believed the navy will be escorting vessels “as soon as it is militarily possible”.
“You cannot clear mines during active combat in a risk free way and the navy will not want to enter the strait,” said Aaron Stein, the president of the Foreign Policy Research Institute. “The risk is intolerable to international shipping and the options the US can provide won’t mitigate it.”
See also: China tightens fuel export curbs as Iran war hits oil supply
WTI has traded in a band of about US$43 this week, the widest range since the depths of the pandemic when prices turned negative. Brent has swung in a range of around US$38. Wild swings have being exacerbated by financial flows from options markets to exchange-traded funds.
That volatility is likely to continue with no signs of the war ending soon. In a social media post on Thursday, Trump said preventing Iran from having nuclear weapons and being a threat to the Middle East is “of far greater interest and importance to me” than the cost of oil.
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