Oil Prices Rise Amid US-Iran Tensions and Strait of Hormuz Disruptions

Kathmandu. Due to the attacks and counter-attacks between America and Iran, instability has again been seen in the oil market. The price of oil increased in the international market on Monday after the increased tension in West Asia exposed the weakness of the interim peace agreement between the two countries. 

Due to this tension, fuel transportation through the Strait of Hormuz has slowed down again. In Monday's trading, Brent crude rose by 58 cents, or 0.8 percent, to $72.57 a barrel, while US West Texas Intermediate (WTI) crude rose by 88 cents, or 1.3 percent, to $70.11 a barrel.

According to ING analysts, many risks still remain in the oil market. After the America-Israel war that started in Iran at the end of last February, oil transportation from that region reached a high point last week, causing a 10.6 percent drop in Brent crude prices. 

However, since last Thursday, transportation has slowed down again after renewed attacks on oil tankers and other ships connected to Qatar in the Hormuz waterway. This incident has been seen as the worst military confrontation since the interim peace agreement, which incited both America and Iran to attack from their respective sides.

To stop the increase in oil prices, America and Iran have agreed on Sunday to end the ongoing hostilities in the Gulf region and to resume negotiations on the dispute over the Hormuz waterway. According to ANZ analysts, the market is now re-evaluating the expectation of a quick improvement in oil supply from the Persian Gulf. The physical flow of oil is still constrained due to tanker congestion, damaged infrastructure, and production shutdowns. It is estimated that it may take the entire year for the supply system to return to pre-war levels.

Meanwhile, Saudi Arabia's oil company Aramco has started loading crude oil from the Ras Tanura terminal west of the Strait of Hormuz since Friday, after four months. Although 14 civilians died in a helicopter crash at the same terminal on Sunday, oil loading work is continuing. The cause of the helicopter crash has not yet been determined.