Oil prices rose on April 9 as doubts about a shaky two-week ceasefire in the Middle East raised concerns that energy supplies through the Strait of Hormuz would remain constrained.
Points of attention
- The fragile two-week ceasefire in the Middle East is driving uncertainty in the oil market, leading to a rise in energy prices.
- The current instability in the region poses a significant threat to oil supplies passing through the vital Strait of Hormuz.
World oil prices are rising rapidly due to events in the Middle East
Brent crude futures rose $1.96, or 2.07%, to $96.71 a barrel, while the price of U.S. West Texas Intermediate (WTI) crude rose $2.60, or 2.75%, to $97.01 a barrel.
Both benchmark prices fell below $100 a barrel in the previous trading session, with WTI recording its biggest drop since April 2020 amid initial expectations that the ceasefire would lead to the full opening of the Strait of Hormuz.
However, analysts said market participants are hesitant to completely abandon pricing due to geopolitical risks and there is no clarity on what the US-Iran talks will mean for oil flows.
"The chances of a meaningful reopening of the [Strait of Hormuz] anytime soon look bleak. The futures market looks a bit volatile. Otherwise, prices should have already returned to pre-ceasefire levels," said Vandana Hari, founder of oil market analysis firm Vanda Insights.
The ceasefire is in question as Israel continued to attack Lebanon on Wednesday, prompting Iranian leaders to suggest that continuing talks to conclude a permanent peace deal would be "unwise."
On April 8, shippers also said they needed more clarity on the terms of the ceasefire before resuming transit through the Strait of Hormuz.
Logistical disruptions, security concerns, increased insurance premiums and operational restrictions mean that very few additional supplies are likely to be shipped through the Strait of Hormuz over the next two weeks, analysts at Standard Chartered said.
Regional oil facilities also remain under threat as Iran has launched strikes on facilities in neighboring countries since the ceasefire, including a pipeline in Saudi Arabia used to bypass the blocked Strait of Hormuz.
Kuwait, Bahrain and the UAE also reported missile and drone attacks yesterday.
