Brent crude crossed $83 per barrel on Wednesday as Iran blocked the oil shipping channel in the Middle East. Crude prices rose due to blocked shipments through the Strait of Hormuz, which has reduced exports from the region.
Iran says it will “set fire” to any ships trying to pass through the Strait of Hormuz, the world’s busiest oil shipping channel. Usually, about 20% of global oil and gas passes through the narrow shipping lane in the Gulf. But Iran’s General Sardar Jabbari said that Tehran will now “not let a single drop of oil leave the region”.
The strait is deep enough for the world’s biggest crude oil tankers, and is used by the major oil and gas producers in the Middle East – and their customers.
Brent crude traded at $83.14 per barrel, up 3.4% from the previous close of $80.37. US benchmark West Texas Intermediate (WTI) increased 3.5% to $76.17 per barrel, compared with $73.58 in the previous session.
After the US and Israel launched attacks on Iran on Feb. 28 despite ongoing negotiations between Tehran and Washington, Brig. Gen. Ebrahim Jabbari, an adviser to the commander-in-chief of Iran’s Revolutionary Guards, said on March 2 that vessels would not be allowed to pass through the Strait of Hormuz. He warned that any ships attempting to transit the waterway would be targeted.
The statement regarding the strait, through which roughly a quarter of global oil trade passes, amplified concerns over global energy supply and triggered sharp price swings in the markets.Market update newsletter
Iraq’s Oil Ministry also announced on Monday that it had decided to halt oil production at the Rumaila field in Basra following Iran’s move to close the Strait of Hormuz.
Meanwhile, US President Donald Trump said he had instructed that political risk insurance and guarantees be provided at a reasonable cost to ensure the financial security of all maritime trade passing through the Gulf, particularly energy shipments.
He added that the US Navy could begin escorting tankers transiting the Strait of Hormuz if necessary. Markets are also focused on concerns that the conflict in the Middle East could weigh on global trade and reignite inflationary pressures.
Analysts warn that rising energy prices could fuel inflation and further complicate policy decisions for the US Federal Reserve (Fed), which has remained cautious about price increases stemming from tariffs.
Minneapolis Fed President Neel Kashkari said it was too early to assess the conflict’s impact on inflation, while New York Fed President John Williams noted that additional rate cuts could be considered if inflation continues to ease. Oil Prices Projected to Rise Amidst U.S.-Iran War.
