WTI Crude Surges as Middle East Shipping Chokepoints Face Dual Threat
Key Takeaways
- •September WTI crude futures rose 12.89% for the week to trade at $92.31 late Thursday.
- •Traders were pricing risks to both the Strait of Hormuz and the Red Sea, not just a single shipping chokepoint.
- •Iran’s Revolutionary Guards said the Strait of Hormuz was under their control and effectively closed during U.S. military operations.
- •The U.S. military had carried out strikes on Iran for twelve consecutive nights by Thursday.
- •Saudi Arabia has pipeline capacity to bypass Hormuz, but the article says it cannot fully replace tanker shipments.
September WTI crude oil futures were trading at $92.31 late Thursday, up $10.54, or 12.89%, for the week. The contract posted a weekly low of $79.58 before climbing to a weekly high of $92.31.
The rally was not a typical risk-premium reaction. West Texas Intermediate began the week with the Strait of Hormuz already impaired, then accelerated as the market recognized that Saudi Arabia's alternate export corridor through the Red Sea was also coming under threat. By Thursday, traders were no longer pricing the disruption of a single chokepoint. They were pricing a global supply system with fewer viable routes to move barrels, rising freight costs, tightening fuel markets, and no clear path toward a ceasefire. The simultaneous threat to both Hormuz and the Red Sea is particularly significant because the two routes, combined, handle a substantial share of seaborne crude and refined products; Saudi Arabia does maintain overland pipeline capacity that can redirect some volumes around Hormuz to its western coast, but that infrastructure has finite throughput and cannot fully replace tanker traffic.
Hormuz Risk Returns to the Forefront
The primary catalyst was the intensifying U.S.-Iran conflict and the damage it was inflicting on shipping through the Strait of Hormuz, one of the world's most critical oil transit routes. Iran's Revolutionary Guards declared that the strait was under their control and effectively closed for as long as U.S. military operations continued — a direct threat to a passage through which roughly one-fifth of global oil consumption flows daily.
Markets had previously experienced flare-ups around Hormuz and initially treated the situation as a problem diplomacy could eventually resolve. That assessment eroded as U.S. strikes continued night after night, with Iran responding through threats and attacks targeting regional shipping. By Thursday, the U.S. military had completed its twelfth consecutive night of strikes on Iran.
A tanker fire near Oman compounded concerns. Iran stated that the vessel had been attempting to navigate a mined route in the southern Strait of Hormuz, while two other vessels...
Source: OilPrice.com