Brent rallies as Hormuz conflict intensifies

The front-month ICE Brent contract has soared by $9.30/bbl on the day, to trade at $87.20/bbl at 09.00 GMT.

IMAGE: An oil pumpjack. Getty Images

Upward pressure:

Brent crude has vaulted higher, gaining nearly $10/bbl on the day, as hostilities in the Strait of Hormuz continued to intensify over the weekend and into this week.

The US Central Command (CENTCOM) has struck Iran again, after President Donald Trump reimposed the blockade on vessel movement in and out of Iranian ports.

“The return of the US blockade is much more impactful for markets than the previous suspension of the sanction waiver on Iranian oil,” two analysts from ING Bank said.

Additionally, the US has proposed a fee equivalent to 20% of a cargo's value to escort vessels through the Strait of Hormuz.

A 20% fee on a vessel carrying about 2 million bbls at $80/bbl will be “equivalent to around $32m [$32 million] or an additional cost of $16/bbl,” ING Bank’s analysts estimated. “This is significantly higher than the $1/bbl toll for which Iran has been pushing,” they added.

Downward pressure:

While there are no significant downward pressures acting on Brent’s price today, market analysts are cautious of weakening global crude oil demand.

The Organization of the Petroleum Exporting Countries (OPEC) has reduced its global oil demand growth projection for 2026 to about 800,000 b/d, around 200,000 b/d lower than its previous estimate.

The Paris-based International Energy Agency (IEA) expects global oil demand to decline by 1 million b/d in 2026 – stopping short of providing an average global oil demand forecast.

Global oil demand is expected to decline this year as geopolitical unrest in the Middle East continues to impact markets across various products and regions.

By Aparupa Mazumder

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