Tankers anchored in the Strait of Hormuz off the coast of Qeshm Island, Iran, on Saturday.Asghar Besharati/The Associated Press
Iran has closed the Strait of Hormuz again after a brief opening, dashing hopes that the millions of barrels of oil and gas that passed through the waterway prior to the war will return to market any time soon.
Hundreds of ships have been stuck in the Gulf since the United States and Israel attacked Iran on Feb. 28, leading Tehran to retaliate by closing the strait – a vital shipping route for a fifth of the world’s oil and gas.
Iran has also rejected new peace talks with the United States, its state news agency reported Sunday, hours after U.S. President Donald Trump had said he was sending envoys to Pakistan for talks and would strike Iran unless it accepted his terms.
Meanwhile, the U.S. attacked and seized an Iranian-flagged cargo ship near the strait that tried to pass its naval blockade, Mr. Trump said in a social-media post Sunday. The move escalated the back-and-forth with Iran over traffic in the strait, amid a delicate ceasefire agreement.
The conflict in Iran has curtailed roughly 12.4 million barrels a day of oil production across Saudi Arabia, Iraq, Iran, the United Arab Emirates, Kuwait, Qatar and Bahrain, according to Rystad Energy. Countries that rely on Middle Eastern fossil fuels, mainly in the Asia-Pacific, are now in crisis and looking for stable supplies to help increase their energy independence.
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Iran announced Friday it would reopen the Strait of Hormuz, but reversed that decision on Saturday after Mr. Trump declined to lift a U.S. blockade of Iranian ports.
Futures prices for Brent crude, the global benchmark, slipped nearly US$10 to US$89 a barrel off the back of Iran’s declaration of free passage through the strait, as markets priced in a growing likelihood of a permanent deal and faster de-escalation. It settled at US$90.38 on market close Friday.
But with the strait remaining blocked and the U.S. and Iran still far from an agreement to end the war, markets could face new volatility when they reopen on Monday.
“The Strait of Hormuz has been the single most consequential variable in global oil markets since the conflict escalated, and any credible signal that the chokepoint may reopen, even temporarily, is a market-moving development of the first order,” Artem Abramov, Rystad Energy’s deputy head of analysis, wrote Friday.
“The market is not waiting for a formal deal – it is pricing in the possibility of one,” he said.
U.S. President Donald Trump accused Iran on Sunday of a 'total violation' of the two countries' ceasefire for firing on ships near the Strait of Hormuz, and renewed a threat to wipe out Iran's bridges and power plants unless it accepted his terms.
Reuters
The extreme market volatility caused by the war has led to the largest oil and gas disruption in history, according to the International Energy Agency.
“Resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy,” the Paris-based energy watchdog wrote in its April oil market report.
The IEA estimates that supply plunged by roughly 10.1 million barrels a day in March, the largest-ever supply disruption, according to its senior oil market analyst, Rebecca Schulz. If the strait doesn’t open up, flows could fall by another 2.9 million barrels a day.
Shipping data Saturday showed that a convoy of eight tankers was crossing the Strait of Hormuz, as some ship owners said they hoped Tehran would allow them to leave the Gulf during a short ceasefire window.
The group – comprising one very large crude oil carrier, several oil product and chemical tankers and liquefied petroleum gas (LPG) carriers – was passing through Iranian waters south of Larak Island, according to MarineTraffic data. More tankers were seen following from the Gulf.
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Five vessels loaded with liquefied natural gas (LNG) from Qatar were also approaching the strait on Saturday, according to ship-tracking data.
Qatar, the world’s second-largest LNG exporter, halted its production in early March after Iran launched multiple attacks on the Ras Laffan LNG hub there. The heavy damage knocked out 17 per cent of Qatar’s LNG export capacity.
Also on Saturday, Iraq’s oil ministry said crude exports would resume from all fields within days, the Iraqi state news agency INA reported.
Two LPG tankers were seen on ship-tracking websites moving eastbound toward the strait early Sunday morning, but the semi-official Tasnim news agency reported that Iran’s armed forces turned them back.
Even once ships can again pass through the strait, a return to prewar shipping levels will take weeks. Roughly 200 vessels filled with oil are waiting to exit the strait and another 140 ships waiting to be filled so they too can move on, according to the IEA.
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The first step is moving out those loaded tankers, Ms. Schulz said Friday on an IEA podcast. Next comes draining down storage, which has effectively filled up in and around the Gulf because of the shipping interruption.
“Once we have a bit more available storage, then we can start actually increasing production from fields,” Ms. Schulz said. “You need to have those consistent loading schedules to be able to have confidence to start opening up your wells again.”
Roughly 40 world leaders, including Prime Minister Mark Carney, called on Iran Friday to immediately cease its threats, laying of mines, drone and missile attacks and other attempts to block the strait to commercial shipping.
“We express our readiness to contribute to appropriate efforts to ensure safe passage through the strait. We welcome the commitment of nations who are engaging in preparatory planning,” they said in a statement.
With reports from Reuters and the Associated Press