Oil rallies as Iran declares Hormuz closed to all traffic

Brent crude’s price has spiked today as Iran declared the Strait of Hormuz closed to all vessel traffic in response to latest US military actions.

IMAGE: The Strait of Hormuz. Getty Images

Oil prices have faced substantial turbulence this week, as a tug-of-war between renewed attacks and hopes for a breakthrough has gripped the global oil market’s sentiment.

The latest escalation in hostilities comes shortly after Iran downed a US Apache helicopter near the Strait of Hormuz earlier this week. The US military responded to the downing by striking Iranian military surveillance, communication systems and air defense sites.

“The strikes are in response to Iran's unwarranted and continued aggression,” the US Central Command (CENTCOM) said on social media platform X.

Following the attacks, Iran’s military allegedly issued an announcement about shutting the strait to all maritime traffic. CENTCOM has denied the closure by posting a ‘fact check’ on X.

Additionally, the US navy disabled a tanker, the Palau-flagged M/T Settebello, in the Gulf of Oman, that failed to comply with orders and attempted to circumvent the ongoing blockade of the Strait of Hormuz.

So far, the US navy has disabled eight non-compliant vessels, redirected 134 ships that complied, and allowed 42 humanitarian aid vessels to pass since initiating the blockade on 13 April.

The International Maritime Organization (IMO) has issued a stark warning that the Persian Gulf remains hazardous amid continued strikes.

“The current situation remains highly volatile, with no reliable security assurances in place. Under such circumstances, safe passage cannot be considered to exist,” IMO’s secretary-general Arsenio Dominguez said in a statement.

Dominguez has also condemned the US strike on M/T Settebello, which ignited an onboard fire and left three seafarers reportedly missing, the IMO said.

Meanwhile, Iranian state media claimed its forces have targeted 18 US military sites, including the US Fifth Fleet headquarters in Bahrain.

Tensions between Washington and Tehran have reached a new peak with the latest round of strikes, effectively undoing the calm established by April’s fragile ceasefire and failing to produce any meaningful diplomatic success.

“Oil prices are trading firmer this morning after further escalation in the Persian Gulf, which eroded hopes for an imminent deal between the US and Iran,” two analysts from ING Bank noted.

By Aparupa Mazumder

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