Oil prices jumped more than $2 a barrel on Thursday after Iran announced the closure of the Strait of Hormuz, the most important shipping route, following additional U.S. strikes on Iranian targets.
Iran's top joint military command said on Thursday that the Strait of Hormuz was closed to oil tankers and commercial vessels, warning that any ship attempting to pass through the waterway would be fired upon.
Crude oil price on June 11
Brent crude futures rose $2.30, or 2.47%, to $95.40 a barrel, while U.S. West Texas Intermediate (WTI) crude gained $2.60, or 2.89%, to $92.63 a barrel. Earlier in the session, U.S. crude futures had advanced by more than $3.
The U.S. military, however, said on X on Wednesday that commercial shipping continued to move through the strait in both directions. It also stated that no U.S. warships had been hit in the area, countering reports from Iranian state media that American vessels near the waterway had come under missile and drone attacks.
According to Reuters, U.S. forces began fresh strikes on multiple targets inside Iran on Wednesday, marking the latest escalation in a conflict that had been largely on hold since early April, when both sides agreed to a fragile ceasefire.
The Strait of Hormuz, which typically handles about one-fifth of global oil and gas shipments, has remained effectively blocked for months, helping keep oil prices elevated.
Morgan Stanley described the oil market as being in "a race against time," warning that some of the factors that have limited the rise in prices could weaken if the Strait of Hormuz remains closed through June.
The brokerage noted that higher U.S. crude exports and softer Chinese demand have so far helped absorb part of the supply shock. However, it cautioned that global supplies could tighten again if disruptions in the strategic shipping route continue, particularly beyond the period during which the U.S. and China are able to cushion the impact.
Haitong Futures said crude prices could move toward the upper end of their trading range as tightening supply-demand conditions coincide with a rapid decline in global oil inventories.
Analysts also said that even if a ceasefire is reached, shipping activity through the Strait of Hormuz could take months to return to normal. Any damage to energy infrastructure, they added, would likely prolong the recovery process further.
Nuvama Institutional Equities said an extended shutdown of the Strait of Hormuz could disrupt nearly 20 million barrels per day of crude flows globally. In such a scenario, the brokerage said oil prices could potentially climb to between $110 and $150 a barrel.
Supply concerns were compounded by a sharp drawdown in U.S. crude inventories. The Energy Information Administration (EIA) said on Wednesday that U.S. crude stockpiles fell by 7.2 million barrels to 426.5 million barrels in the week ended June 5. Analysts surveyed by Reuters had expected a decline of 4 million barrels, per Reuters.
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