Crude Oil Soars As U.S.-Iran Conflict Intensifies Over Hormuz Issue

Summary

(RTTNews) - Rebounding from Friday's losses, crude oil has skyrocketed on Monday as U.S.-Iran tensions grow deeper despite the ongoing diplomatic efforts to end the war, while the Strait of Hormuz blockade continues to hold oil transit. WTI Crude Oil for June month delivery was last seen trading up by $4.00 (or 3.92%) at $105.94 per barrel. The war between the U.S. and Iran that began on February 28 shows no sign of a peaceful settlement, continuing to keep the Hormuz crisis alive. On Sunday, U.S. President Donald Trump announced that the U.S. will start to guide ships of countries that are not involved in the war with Iran but affected due to the Strait of Hormuz blockade as they asked the U.S. help to get away from the risky zone. Calling the initiative "Project Freedom," Trump stated that the U.S. guidance will remain until the ships are safely out of the strait. Trump also asserted that the ships will not be returning until the area becomes safe for navigation. Details on which countries sought U.S. support and how the U.S. will provide safe passage through the strait were not outlined by Trump. However, Trump warned that if there is any "interference" to the process, it will be dealt with force, thereby renewing concerns of war-threat. Experts are concerned that this act of "goodwill" from the U.S. could antagonize Iran and potentially become a risky flashpoint. Iran's semi-official news outlet Fars News Agency issued a warning to vessels in the gulf that the strait remains closed and any attempt to pass without the permission of Iran and outside the designated route is prohibited and would invite attacks from Iran. Adding to the uncertainty, Iran's media reported that two Iranian missiles hit a U.S. warship that tried to enter the strait. However, U.S. Central Command (Centcom) denied any such incident. Ali Abdollahi, the head of the Iranian military's unified command warned that U.S. forces will be attacked by Iran if they venture into the strait and instructed commercial ships and oil tankers to coordinate with Iran. In a separate note, Trump added that the U.S. negotiators are holding positive discussions with Iranian counterparts and hinted that it could result in something "positive for all." Around 20,000 seafarers in nearly 2,000 ships have been stranded across the narrow shipping lane of Hormuz since the U.S.-Iran war began. U.S. Central Command stated that the project will include guided-missile destroyers, along with 100 land and sea-based aircraft, multi-domain unmanned platforms, and 15,000 service members. Admiral Brad Cooper of U.S. Central Command stated that U.S. forces eliminated six small boats attempting to interfere with commercial shipping, but Iran's state media denied the claims. Sparking doubts on the longevity of the ongoing ceasefire, the United Arab Emirates stated that it was under attack from Iranian drones and missiles. On the diplomatic front, Trump had rejected the latest peace proposal submitted by Iran and Iran is reportedly reviewing the response from the U.S. Separately, in the first virtual meeting after the recent surprise exit of the United Arab Emirates on Sunday, the Organization of Petroleum Exporting Countries decided to increase crude oil production by close to 200,000 barrels per day. However, markets can only benefit the increase if the Strait of Hormuz is fully reopened. The U.S. Dollar Index was last seen trading at 98.45, up by 0.30 points (or 0.31%). The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.