After a cargo ship was hit by a projectile in the Strait of Hormuz, global oil prices have risen back above $90 a barrel, adding to fears that the escalating conflict with Iran could lead to a prolonged disruption to one of the world’s most important energy shipping routes.
Brent crude, the international benchmark, rose sharply to around $92.34 a barrel, recovering from earlier losses and adding to the dramatic volatility seen in energy markets over the past 48 hours. The latest surge followed reports from the United Kingdom Maritime Trade Operations (UKMTO) that a commercial cargo ship in the Strait of Hormuz had been hit by an unknown projectile, causing a fire on board.
The incident is the latest in a series of attacks on ships in the Gulf region and underscores the growing risks to global oil and gas supply chains as the Middle East conflict worsens.
Shipping through the Strait of Hormuz, a narrow waterway between Iran and the United Arab Emirates that normally handles around a fifth of global oil exports, has ground to a near halt as commercial operators weigh the risks of operating in the region.
Peter Aylott, director of policy at the British Chamber of Shipping, said attacks on ships had been indiscriminate and spread across the region, including incidents near Kuwait and in the western Persian Gulf.
He warned that the threat of further strikes had virtually paralyzed maritime traffic.
“The number of ships passing through the strait has fallen from around 100 ships per day to fewer than five, and most of these appear to be Iranian ships,” Aylott said.
The situation has left around 1,000 merchant ships stranded in the Gulf, including an estimated 80 to 90 vessels carrying British interests, as shipping companies refuse to risk moving cargo through the increasingly dangerous corridor.
Two other ships, a bulk carrier and a container ship, were also reportedly attacked in the last 24 hours, raising fears that the disruption could worsen as hostilities continue.
Energy markets have seen extraordinary swings as traders try to gauge how long the conflict will last and whether the Strait of Hormuz will reopen to normal shipping traffic.
Brent crude rose above $118 a barrel earlier in the week, its highest level since 2022, before falling to nearly $80 a barrel on reports that governments were considering releasing emergency oil reserves.
Following the recent ship attack, the benchmark rebounded significantly, reflecting ongoing uncertainty over supply.
At one point during Asian trading, Brent slipped to $88 a 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 in the Strait of Hormuz quickly shifted market sentiment back towards supply fears and caused prices to rise again.
Overall, the price of Brent crude has risen more than 40 percent since the start of the year, driven by rising geopolitical tensions and concerns about disruptions to global energy flows.
Further uncertainty exists over whether military escorts could be used to secure shipping routes through the Strait of Hormuz.
US Energy Secretary Chris Wright posted briefly on social media that the US Navy had escorted an oil tanker through the strait to ensure energy supplies could continue to flow.
The post was quickly deleted and American officials clarified that the US military is not currently escorting commercial vessels through the waterway.
The confusion has added to investor uncertainty about the security of global energy supplies and the possibility of further escalation.
Without clear military protection or a diplomatic breakthrough, shipping companies are likely to remain cautious about returning to the route.
The renewed rise in oil prices has led to declines in European stock markets as investors worry 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 key European markets including Germany and France, while Asian shares posted slight gains overnight.
Higher oil prices are widely expected to push up global inflation and potentially force central banks to keep interest rates higher for longer.
European leaders have warned that the conflict is already driving up energy import costs across the continent.
Ursula von der Leyen, president of the European Commission, said the disruption had already cost the European Union around three billion euros in additional energy imports.
“Gas prices have risen by 50 percent and oil prices by 27 percent,” she told EU lawmakers in Strasbourg.
“This is the price of our dependence.”
Despite the price rise, von der Leyen rejected calls for the EU to resume buying Russian energy – imports that were largely halted after Russia’s full-scale invasion of Ukraine in 2022.
Energy traders say the key question facing markets now is how long the Strait of Hormuz will remain effectively closed.
If tanker traffic remains severely restricted, oil prices could rise even further in the coming weeks, potentially surpassing previous crisis levels, analysts say.
The Strait of Hormuz crisis is already drawing comparisons to previous global energy shocks, and economists warn that continued disruption could slow global economic growth while reigniting inflationary pressures.
Currently, markets remain caught between the expectation of emergency supplies and the very real risk that the world’s most important oil shipping route could remain unusable for an extended period.
