Oil prices have risen sharply as violence in the Strait of Hormuz cast doubt over the fragile ceasefire between the United States and Iran.
Brent crude, the primary benchmark for oil prices worldwide, rose by nearly 6 percent on Monday to $114.44 a barrel. Brent futures eased somewhat on Tuesday morning, trading at $113.54 as of 02:00 GMT.
The latest surge in prices came after the US military said it had destroyed six of Iran’s small boats in response to Iranian attacks on commercial vessels in the waterway, and the United Arab Emirates reported coming under attack from Iranian missiles and drones.
An Iranian military source cited by the official IRNA news agency denied that US forces had sunk several Iranian boats, branding the US claim “false”.
“The market is pricing oil higher as it factors in the risk of more oil infrastructure damage and the likelihood that the Strait of Hormuz will be shut beyond the timeline that the Trump administration has laid out,” said June Goh, a senior oil market analyst at Sparta in Singapore.
Despite US President Donald Trump’s announcement on Monday that the United States military would “guide” commercial vessels through the critical strait, shipping companies have been hesitant to transit the waterway amid persistent safety concerns.
While the US military reported that two US-flagged merchant ships crossed the strait in the hours after Trump announced “Project Freedom”, there have yet to be any signs of a substantial resumption of maritime traffic in the region.
On Monday, the head of the International Transport Workers’ Federation (ITF) said that ships should not be asked to cross the strait “without a full guarantee of safety”.
“Freedom of navigation must be restored in full accordance with international law, but it must be done in a way that is coordinated, transparent and puts seafarers’ safety first,” ITF General Secretary Stephen Cotton told Al Jazeera, adding that there was “little clarity” about how the operation would “provide safe evacuation, nor assurance from Iran that transit will be guaranteed”.
“Until we have those assurances, we are calling on shipowners and flag states not to treat this announcement as a green light,” Cotton said. “These workers have already endured weeks of fear, uncertainty and hardship. They must not now be put in harm’s way.”
According to the International Maritime Organization (IMO), up to 20,000 seafarers remain stranded on some 2,000 vessels in the Strait of Hormuz. The IMO has said that there was “no precedent for the stranding of so many seafarers in the modern age”.
The United Nations, meanwhile, has called for freedom of navigation in the strait, saying the closure of the waterway is “impeding the delivery of oil, gas, fertiliser, and other critical commodities” and “strangling the global economy”.
Brent prices have risen more than 50 percent since the start of the war in late February, amid an estimated daily production shortfall of 14.5 million barrels.
Even if Washington and Tehran reach a deal to end the war, oil prices are likely to remain elevated for some time due to the backlog of unloaded cargo, damaged regional infrastructure, and the need to clear Iranian mines, according to analysts.
Goh, the analyst at Sparta, said she expected prices to rise further as countries dip into their energy supplies. “As more OECD inventory reports are published showing significant drawdown rates, we should see an even more bullish trend for the Brent price,” Goh said.
Source: www.aljazeera.com