Oil Holds Firm as Iran-Oman Hormuz Deal Nears

Crude oil held above $92 per barrel on Tuesday, hovering at its highest level in three months after Iran said an agreement with Oman to manage shipping through the Strait of Hormuz was nearing completion, fueling concerns over Tehran’s growing control of the key waterway. Markets were also focused on how the US might respond after striking Iranian tankers in the strait over the weekend. Oil prices surged nearly 10% last week as renewed US-Iran fighting raised fears of further disruptions to energy supplies from the Middle East. Both sides stepped up attacks over the weekend, targeting ships and military vessels around Hormuz. Saudi Aramco’s facilities in Jazan near the Red Sea were also attacked again on Monday, although the damage was limited. Despite the heightened risks, oil continues to flow out of the Persian Gulf, with roughly 7 million barrels a day of crude and refined products reportedly passing through the Strait of Hormuz.

Crude oil rose to the $92 per barrel mark on Monday, the highest in three months, and nearly 40% above levels from before the outbreak of the war in Iran to reflect expectations of prolonged periods of tight supply. Reports from the FT showed Saudi Aramco oil facilities were hit in fresh attacks on Monday. Also, Iran said it was close to agreeing on a tanker route through the Strait of Hormuz with Oman. The consistent hawkish rhetoric against the corridor by the US added to escalatory risks as the US and Iran continued to strike each others' military and commercial vessels. Energy Secretary Chris Wright said Washington would maintain its naval presence and blockade. A greater rebound to crude prices were prevented by major economies tapping on inventory to tame higher import turnover. The US SPR plunged to less than 290 million barrels, the lowest since 1982. On top of that, China significantly cut imports of crude oil and refinery runs.

Crude oil fluctuated above $91 a barrel on Monday after surging 9.7% last week, as escalating tensions between Washington and Tehran raised fears of prolonged disruptions to energy shipments through the Strait of Hormuz. The US said it had struck three Iranian oil tankers over the weekend, destroying one, in retaliation for ballistic missile attacks on US Navy warships. Iran responded by threatening to establish a new restricted zone outside the strait, reportedly extending from the US Navy blockade line into parts of the Persian Gulf. Tehran also claimed to have targeted three tankers, although the reports could not be independently confirmed. US Energy Secretary Chris Wright said Washington would maintain its naval presence and blockade, aimed at limiting Iranian oil exports while supporting the safe passage of commercial vessels. Wright previously said that millions of barrels of crude were still moving through the Strait of Hormuz despite the escalating conflict.