Oil prices spike as conflict erupts in Strait of Hormuz
John Power
Brent crude jumped nearly 6% after conflict erupted in the Strait of Hormuz, threatening a fragile US-Iran ceasefire. The US military said it destroyed six Iranian vessels in response to attacks on commercial ships, while Iran denied the claims. Analysts warn of prolonged high oil prices due to infrastructure damage and potential strait closure.
Global oil prices surged after conflict erupted in the Strait of Hormuz, raising doubts about the ability to maintain a fragile ceasefire between the US and Iran.
On June 5, Brent crude, the global benchmark, jumped nearly 6% to $114.44 a barrel. By the morning of June 6, Brent had eased slightly to $113.54.
The latest spike followed a US military announcement that it had destroyed six Iranian small vessels in retaliation for Iranian attacks on commercial ships in the waterway. The United Arab Emirates also reported missile and drone strikes from Iran.
An Iranian military source, cited by the IRNA news agency, rejected the US claim that its forces had sunk multiple Iranian vessels, calling the report "false."
Market analysts are pricing in higher oil, said June Goh, an oil market analyst at Sparta in Singapore, because it factors in the risk of "further damage to oil infrastructure and the possibility that the Strait of Hormuz will be closed beyond the route laid out by the Trump administration."
Despite US President Donald Trump's statement on June 5 that the US military would "lead the way" for commercial shipping through the strategic waterway, shipping companies remain hesitant over safety concerns. While the US military said two US-flagged cargo ships had traversed the strait hours after Trump announced "Operation Freedom," there are no signs of a significant resumption of maritime traffic in the region.
On June 5, the head of the International Transport Workers' Federation (ITF) called against requiring ships to transit the strait "without adequate safety guarantees." ITF Secretary-General Stephen Cotton said: "Freedom of navigation must be fully restored in accordance with international law, but it must be done in a coordinated, transparent manner placing the safety of seafarers first." He added that there was "very little clarity" on how the operation would "ensure safe evacuation, and no guarantee from Iran that transit would be assured."
According to the International Maritime Organization (IMO), up to 20,000 seafarers remain stranded on approximately 2,000 vessels in the Strait of Hormuz. The IMO noted "no precedent for the stranding of so many seafarers in modern times."
The United Nations has called for upholding freedom of navigation in the strait, arguing that the closure of the waterway is "impeding the transport of oil, gas, fertilizer, and other essential goods" and "choking the global economy."
Brent crude has risen more than 50% since the start of the war in late February, amid an estimated supply shortfall of 14.5 million barrels per day. According to analysts, even if Washington and Tehran reach an agreement to end the war, oil prices could remain elevated for some time due to a backlog of cargoes yet to be offloaded, damaged regional infrastructure, and the need to clear Iranian mines. Goh predicted further price increases as countries draw on their energy reserves.
