Oil prices surged past $100 per barrel on Monday as the United States Navy geared up to restrict vessel access to and from Iran through the Strait of Hormuz. This action may limit Iran’s oil shipments following unsuccessful negotiations between Washington and Tehran to conclude the ongoing conflict.
Brent crude futures increased by $6.52, or 6.9%, reaching $101.72 per barrel by 1306 GMT, after a 0.75% drop in the prior session. U.S. West Texas Intermediate crude rose approximately $7, or 7.2%, to $103.55, following a 1.33% decline previously.
On Sunday, President Donald Trump announced that the U.S. Navy would initiate the blockade of the Strait of Hormuz, escalating tensions after extended discussions with Iran failed to secure an agreement to end the war, endangering a tentative two-week truce.
He noted that elevated oil and gasoline costs might persist until the U.S. midterm elections in November, unusually recognizing the possible political repercussions of his choice to launch an assault on Iran six weeks earlier.
“The U.S. blockade declaration indicates recognition that the truce’s key condition—as viewed by the U.S.—involving the strait’s reopening, is currently unfeasible,” stated Erik Meyersson, an analyst at SEB, a Nordic bank.
U.S. Central Command indicated that American forces would commence the blockade of all sea traffic to and from Iranian ports starting at 10 a.m. ET (1400 GMT) on Monday.
The measure would apply evenly to ships of every country entering or leaving Iranian ports and coastal zones, encompassing all Iranian facilities in the Arabian Gulf and Gulf of Oman, according to a CENTCOM statement posted on X.
U.S. personnel would not interfere with navigation rights for ships heading to or from ports outside Iran via the Strait of Hormuz, the statement clarified.
Although Trump mentioned blocking any ships that compensated Iran with fees, Iran’s envoy in New Delhi stated on Monday that tankers from India passing through the strait did not make such payments.
Iran’s Revolutionary Guards warned on Sunday that foreign warships nearing the Strait of Hormuz would breach the truce and face severe consequences.
The OPEC alliance reduced its projection for global oil demand in the second quarter by 500,000 barrels daily, attributing it to the Middle East conflict’s effects.
In a Monday update on its site, OPEC reported that crude output from OPEC+ nations averaged roughly 35.06 million barrels per day in March, showing a 7.7 million barrel per day decrease from the previous month.
Spot prices for physical crude are commanding substantial markups over futures contracts, with certain types hitting all-time peaks around $150 per barrel.
“Should President Trump follow through on his blockade warning with real naval presence, the gap between futures and physical markets could narrow quickly,” commented Helima Croft, an analyst at RBC Capital Markets.
Shipping records from LSEG indicate that oil tankers are avoiding the Strait of Hormuz in anticipation of the U.S. restrictions on Iran.
Nevertheless, data revealed three fully loaded supertankers traversed the strait on Saturday, seemingly the initial departures from the Gulf since the recent truce agreement.
Saudi Arabia announced on Sunday that it had fully reinstated oil transport capacity via the East-West pipeline to about 7 million barrels per day, after repairs from damages incurred during attacks in the Iran-related hostilities.
