Oil prices rise for fourth day as Strait of Hormuz uncertainty fuels market concerns

Global oil prices extended their gains for a fourth consecutive session on Wednesday as traders assessed conflicting statements from the United States and Iran over the status of the strategically important Strait of Hormuz

LONDON: Global oil prices extended their gains for a fourth consecutive session on Wednesday as traders assessed conflicting statements from the United States and Iran over the status of the strategically important Strait of Hormuz, while renewed concerns about regional tensions continued to support crude markets.

Brent crude futures increased by 69 cents, or 0.8%, to $91.71 a barrel, while US West Texas Intermediate (WTI) futures gained 76 cents, or 0.9%, to $85.70 a barrel.

Both benchmarks had settled at their highest levels in more than three weeks on Tuesday, reflecting growing investor concern that diplomatic efforts to ease tensions between Washington and Tehran could be losing momentum.

Hormuz uncertainty keeps markets on edge

Oil markets have been particularly sensitive to developments surrounding the Strait of Hormuz, a critical shipping route connecting the Persian Gulf with international markets.

US President Donald Trump said on Tuesday that there were no ongoing negotiations with Iran and maintained that the waterway remained open to shipping. Tehran, however, has indicated that the strait remains effectively closed to commercial traffic.

The conflicting statements have added uncertainty for ship operators and energy traders, particularly as vessels face increased security risks while attempting to move through the region.

A temporary ceasefire agreement expired on Monday, while an Iranian official told Reuters that Tehran was preparing for the consequences of the diplomatic deadlock. Despite the heightened tensions, there were no reports of fresh attacks by either side on Tuesday.

June Goh, senior oil market analyst at Sparta Commodities, said shipping risks were increasing again as attacks involving Iran and the Houthis continued to threaten two important regional maritime routes — the Strait of Hormuz and the Bab el-Mandeb Strait.

Shipping activity through Hormuz slows

Data released on Wednesday showed that shipping traffic through the Strait of Hormuz had declined as many vessel operators chose to avoid the waterway amid uncertainty over whether the reported blockade had been lifted.

The slowdown has raised concerns about potential disruptions to global oil supplies because a significant share of the world’s crude and petroleum products traditionally passes through the strait.

However, producers in the Gulf are attempting to reduce the impact of the disruption by using alternative export routes to transport crude toward the Gulf of Oman.

Goh said these alternative routes, if they can operate reliably over an extended period, could allow Gulf producers to gradually restore some oil output that has been temporarily shut in because of transportation constraints.

Iraq seeks alternative export routes

Iraq has also moved to reduce its dependence on the Strait of Hormuz.

The Iraqi cabinet approved arrangements allowing crude exports through specialised international and domestic companies and via several alternative outlets, according to a government statement issued Tuesday.

Under the new mechanism, contracts are expected to remain in effect for three months beginning September 1, providing Baghdad with additional flexibility to keep crude exports moving if disruption around Hormuz persists.

The move highlights the broader concern among oil-producing countries that prolonged restrictions on the waterway could complicate international energy shipments and put additional pressure on crude prices.

Chinese shipping firms avoid key waterways

Shipping companies have also responded to the heightened risks.

Two major Chinese shipping firms have reportedly halted the movement of oil tankers through both the Strait of Hormuz and the Bab el-Mandeb Strait amid the ongoing conflict in the Middle East.

Instead, the companies are collecting oil cargoes from locations outside the Gulf, reflecting the growing willingness of shipowners to take alternative routes to avoid potential attacks or delays.

Any sustained reduction in tanker traffic through the region could increase transportation costs and create further uncertainty for refiners and energy buyers.

US inventories in focus

In the United States, market participants were also watching domestic oil inventory data for signs of changes in demand and supply.

According to figures cited from the American Petroleum Institute, US crude oil and distillate inventories declined last week, while gasoline stocks increased.

The more closely watched official figures from the US Energy Information Administration (EIA) were due later on Wednesday.

Analysts surveyed by Reuters expected US crude inventories to have fallen by approximately 600,000 barrels during the week ended August 14.

A larger-than-expected decline in crude stocks could provide additional support to oil prices by signalling tighter domestic supplies. Conversely, a significant increase in inventories could limit the recent rally.