Oil prices rise above $90 after tanker attack in Strait of Hormuz as Iran tensions roil global energy markets

Global oil prices rose to $90 a barrel after a cargo ship was hit by a projectile in the Strait of Hormuz, fueling fears that an escalating conflict involving Iran could cause prolonged disruption to one of the world’s most important shipping lanes.

Brent crude, the international benchmark, rose sharply to around $92.34 a barrel, recovering from earlier losses and extending the dramatic volatility seen across energy markets in the past 48 hours. The latest operation followed reports from the United Kingdom Maritime Trade Operations (UKMTO) that a cargo ship had been hit by an unknown projectile in the Strait of Hormuz, causing a fire.

The incident is the latest in a series of attacks on ships in the Gulf region, underscoring the growing threat to global oil and gas supply chains as conflict in the Middle East escalates.

Shipping through the Strait of Hormuz, the narrow waterway between Iran and the United Arab Emirates that normally carries one-fifth of the world’s oil exports, has come to a near standstill as commercial operators weigh the risks of operating in the area.

Peter Aylott, director of policy at the UK Chamber of Shipping, said attacks on ships were indiscriminate and widespread across the region, including incidents near Kuwait and in the western Persian Gulf.

He warned that the risk of continued strikes has crippled the transportation of marine vehicles.

“Ships passing through the port have dropped from 100 ships a day to less than five, and most of them look like Iranian ships,” Aylott said.

The situation has left around 1,000 commercial vessels stranded in the Gulf, including around 80 to 90 vessels with UK interests, as shipping companies refuse to risk moving cargo through the highly dangerous channel.

Two additional ships, a bulk carrier and a container ship, were also reported to have been hit in the past 24 hours, raising concerns that disruptions could escalate if the war continues.

Energy markets experienced unusual volatility as traders tried to gauge how long the conflict would last and whether the Strait of Hormuz would reopen to normal traffic.

Brent crude rose to above $118 a barrel earlier in the week, the highest level since 2022, before falling to around $80 a barrel amid reports that governments were considering releasing emergency oil reserves.

The benchmark then doubled sharply after the latest shipping attack, reflecting continued uncertainty about supply.

At one point during Asian trading, Brent fell to $88 per barrel, after the Wall Street Journal reported that the International Energy Agency (IEA) was considering the largest coordinated release of oil reserves in its history.

Such a move would exceed the 182 million barrels released in 2022 following Russia’s invasion of Ukraine.

However, the attack on the Strait of Hormuz quickly shifted the market mood back to supply fears, sending prices up again.

Overall, Brent crude is now up more than 40 percent since the start of the year, driven by tensions in the country and concerns about disruptions to global energy flows.

Some uncertainty has arisen over whether warships could be used to protect shipping lanes through the Strait of Hormuz.

US Energy Secretary Chris Wright briefly posted on social media that the US Navy had escorted an oil tanker to the road to ensure power continued to flow.

The post was quickly removed, and American officials clarified that the US military does not currently operate commercial vessels in the waters.

The confusion added to investor uncertainty about the security of global energy exports and the potential for continued growth.

Without clear military protection or legal success, shipping companies are expected to remain cautious about getting back on track.

A renewed rise in oil prices caused a decline in European stock markets as investors worried about the economic impact of higher energy costs.

In London, the FTSE 100 fell 1 percent to 10,301, reversing the previous day’s gains. Shares also fell in major European markets including Germany and France, while Asian stocks posted small gains overnight.

Higher oil prices are expected to increase global inflation, which could force central banks to keep interest rates high for longer.

European leaders have warned that the dispute is already raising the cost of energy imports across the continent.

Ursula von der Leyen, president of the European Commission, said the disruption had already cost the European Union nearly three billion euros in energy exports.

“Gas prices have increased by 50 percent and oil prices by 27 percent,” he told EU lawmakers in Strasbourg.

“That is the price of our dependence.”

Despite the price hike, von der Leyen rejected calls for the EU to return to buying Russian energy – imports were largely suspended after Russia’s full-scale invasion of Ukraine in 2022.

Energy traders say the key question now facing markets is how long the Strait of Hormuz will remain closed.

If tanker traffic remains severely restricted, analysts warn that oil prices could rise even higher in the coming weeks, possibly surpassing past crisis levels.

The Strait of Hormuz crisis has already drawn comparisons to previous global energy crises, and economists warn that prolonged disruptions could slow global economic growth while reigniting inflationary pressures.

For now, markets are still caught between expectations of an emergency release and the very real risk that the world’s most important oil transportation route could remain idle for a long time.