The US-Iran war has resulted in a physical chokepoint, taking offline part of the supply of oil and gas due to the closure of the Strait of Hormuz. In a dramatic turn of events, Brent crude futures slumped 14.43% to hit an intraday low of $96 per barrel, while WTI crude futures tanked 14.25% to reach an intraday low of $84.23 per barrel.
This plunge in crude oil prices follows President Donald Trump’s announcement to halt military strikes on Iranian power plants and energy infrastructure. Trump stated, “I am pleased to report that the United States of America and the country of Iran have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.” He further instructed the Department of War to postpone any military actions for five days, contingent on the success of ongoing discussions.
Despite this temporary reprieve, the situation remains precarious. The International Energy Agency (IEA) has assessed that the current episode represents the largest supply disruption in the history of the global oil market. Flows through the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas flows, have collapsed from 20 million barrels per day to a trickle.
Saudi Arabia has warned that if the conflict continues beyond April, oil prices could soar to $180 per barrel. Similarly, Qatar’s Energy Minister has cautioned that Brent could reach $150, reflecting the ongoing volatility in the region.
As the war has damaged major energy facilities in the Gulf, the longer the conflict persists and the disruption of free transit through the Strait continues, the longer oil and gas prices are expected to remain elevated. Observers are closely monitoring the situation, as Gulf production cuts of at least 10 million barrels per day are already in effect.
The US has been actively working to reopen the Strait of Hormuz for energy shipments, but uncertainties remain about the stability of the region. Details remain unconfirmed regarding the long-term implications of these developments on global oil markets.
