Brent crude oil rose above $83 per barrel on Wednesday as Iran blocked Strait of Hormuz the oil shipping channel in the Middle East, thereby halting oil exports from the region.
Speaking on the blockage of the channel, Iran’s General Sardar Jabbari said that Tehran will now “not let a single drop of oil leave the region”, and threatened that Iran would “set fire” to any ships trying to pass through the Strait of Hormuz, the world’s busiest oil shipping channel.
Usually, about 20% of global oil and gas passes through the Strait of Hormuz, which is deep enough for the world’s biggest crude oil tankers, and is used by the major oil and gas producers in the Middle East and their customers.
Latest reports indicated that Brent crude traded at $83.14 per barrel, up 3.4% from Tuesday’s close of $80.37 while the US benchmark West Texas Intermediate (WTI) increased 3.5% to trade at $76.17 per barrel, compared with $73.58 per barrel price on Tuesday.
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Following the US-Israeli joint attacks on Iran last Saturday, despite ongoing negotiations between Tehran and Washington, Brig. Gen. Ebrahim Jabbari, an adviser to the commander-in-chief of Iran’s Revolutionary Guards, said on March 2 that vessels would not be allowed to pass through the Strait of Hormuz. He warned that any ships attempting to transit the waterway would be targeted.
The announcement raised concerns among global leaders and economists over the implications for global energy supply that had triggered sharp price swings in the markets.
Based on the escalating air strikes by US-Israeli forces on Iran, Iraq’s Oil Ministry announced on Monday that it had halted oil production at the Rumaila field in Basra following Iran’s move to close the Strait of Hormuz.
Meanwhile, US President Donald Trump said he had directed that political risk insurance and guarantees should be provided at a reasonable cost to ensure the financial security of all maritime trade passing through the Gulf, particularly energy shipments.
This is even as he hinted that the US Navy could begin escorting tankers transiting the Strait of Hormuz if necessary.
