Oil soars after Iran claims “complete control” over Strait of Hormuz

Brent crude’s price is trading near $85/bbl, following media reports that Iran’s Islamic Revolutionary Guard Corps (IRGC) has completely sealed the Strait of Hormuz.

IMAGE: Getty Images

The news comes amid intense shelling around the highly critical chokepoint that is responsible for shipping about 20% of global crude oil flows.

Yesterday, a commercial ship anchored at about 30 nautical miles (NM) south-east of the port of Mubarak Al Kabeer, Kuwait, reported a “large explosion”, the United Kingdom Maritime Trade Operations (UKMTO) reported.

“There is oil in the water coming from a cargo tank which could have some environmental impact, the vessel has taken on water,” the UKMTO said.

Another containership, about 2 NM north of Oman and moving eastbound in the Strait of Hormuz, was “hit by an unknown projectile” – causing a fire in the engine room, the UKMTO reported.

These incidents mark the latest in a series of strikes targeting commercial ships following the start of US-Israel conflict with Iran – which is in its sixth day now.

“The disruption to oil flows through the Strait is starting to affect oil flows further upstream,” remarked two analysts from ING Bank.

The IRGC has declared “complete control” of the Strait of Hormuz, Al Jazeera reported, citing Iran’s state-controlled media company Fars News Agency.

“Currently, the Strait of Hormuz is under the complete control of the Islamic Republic’s Navy,” Al Jazeera reported, citing IRGC official Mohammad Akbarzadeh.

Maritime authorities, including the UKMTO, have called on vessels transiting the region to stay vigilant and report suspicious movements.

Meanwhile, US President Donald Trump said that Washington will provide insurance and naval escorts for commercial vessels in the region “as soon as possible.”

“The [Trump’s] promise of such guarantees comes as insurers are cancelling war risk coverage for vessels moving through the Strait of Hormuz,” ING Bank analysts said. “This is welcome news, but clearly it won’t happen overnight,” they added.

Growing security risks have already started to hamper tanker traffic through the Strait of Hormuz. As many as 200 vessels are currently anchored off the Gulf coast, according to Reuters estimates.

By Aparupa Mazumder

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