Oil Prices Climb as Hormuz Shipping Risks Threaten Gulf Supply

Key Takeaways

• Brent crude rose 1.2% to $85.72 per barrel in early Wednesday trading.
• WTI gained 0.8% to $79.98 after both benchmarks reached one-month highs.
• Renewed US-Iran hostilities have increased concerns about shipping through the Strait of Hormuz.
• Vessel traffic continues, but recent data show that most visible transits are connected to Iranian trade.
• Brent’s return to steep backwardation indicates expectations of tighter near-term supplies.
• Further escalation could extend the rally, although diplomacy and adequate physical supply may limit gains.

Oil Extends Rally as Middle East Hostilities Intensify

Oil prices moved higher on Wednesday, July 15, as renewed military exchanges between the United States and Iran raised concerns about the security of energy shipments through the Strait of Hormuz.

Brent crude futures climbed 99 cents, or 1.2%, to $85.72 per barrel at 04:00 GMT. US West Texas Intermediate crude increased 64 cents, or 0.8%, to $79.98 per barrel. Both contracts had already closed approximately 2% higher on Tuesday, reaching their strongest levels in about a month.

The latest advance reflects a growing geopolitical premium rather than a confirmed loss of all Middle Eastern oil supply. The physical market remains supplied, but traders are paying more attention to whether tankers can move safely and predictably through the Gulf.

President Donald Trump reimposed a naval blockade on Iranian ports, while US forces launched additional strikes intended to weaken Iran’s ability to target commercial vessels. Tehran responded with further attacks on US-linked facilities in the region and claimed that it had again closed the strait.

Why the Strait of Hormuz Matters to Oil Prices

The Strait of Hormuz is one of the most important maritime chokepoints in the global energy market. Before the latest conflict began, roughly one-fifth of worldwide oil and liquefied natural gas shipments passed through the narrow waterway each day.

This means oil prices can react before an actual shortage appears. Shipowners may delay voyages, insurers may raise premiums and refiners may seek alternative supplies when the risk of attack increases. These additional costs can lift the effective price of delivered crude even when production facilities remain operational.

Recent attacks on commercial ships have made tanker operators particularly cautious. The United States said Iran had attacked seven commercial vessels during the previous week, leaving nearly a dozen crew members dead, missing or injured. Such claims remain part of the wider conflict narrative, but the visible decline in non-Iranian traffic confirms that security concerns are influencing shipping decisions.

The key issue is therefore not simply whether Hormuz is officially open or closed. What matters to the oil market is whether commercial operators consider the route safe enough to use without unacceptable financial and operational risk.

Tanker Traffic Continues, but Flows Remain Uneven

Ship-tracking data showed that 11 vessels crossed the Strait of Hormuz on Tuesday, up from the extremely low levels recorded during the previous few days. However, nine of those ships followed routes linked to Iranian trade.

The vessels included three empty oil tankers entering the Gulf and an Iranian export cargo carrying approximately two million barrels of crude. Tankers carrying refined products and liquefied petroleum gas also left through the strait.

There were no visible tanker entries or exits connected to oil and gas loadings from other Gulf producers that day. This suggests that the increase in vessel numbers did not represent a broad recovery in regional exports.

Public tracking data may also understate actual activity because some ships have switched off their automatic identification systems. Nevertheless, the available information shows that traffic remains well below normal and heavily dependent on a vessel’s ownership, cargo and route.

Brent Market Structure Signals Near-Term Tightness

The change in Brent’s futures curve provides another indication that traders are becoming more concerned about immediate supply.

The first-month Brent contract traded at an $8.92-per-barrel premium to the contract for delivery six months later. This market structure, known as backwardation, typically reflects strong demand for immediately available crude or expectations that short-term supply will remain restricted.

The move represents a sharp reversal from early July, when prompt Brent traded at a discount to later contracts. That earlier contango structure suggested that the market expected adequate supply as Gulf exports gradually recovered.

Middle Eastern benchmarks, including Oman, Dubai and Murban crude, have also moved from discounts to premiums. This strengthens the argument that the latest rally is beginning to affect expectations in the physical oil market rather than remaining purely speculative.

Could Oil Prices Return to $100?

A return towards $100 per barrel is possible, but it would probably require a more severe and prolonged disruption.

The largest upside risk would be direct damage to oil fields, refineries, export terminals or other Gulf energy infrastructure. A sustained interruption to non-Iranian exports through Hormuz would also represent a much larger supply shock than the current slowdown in tanker traffic.

President Trump has indicated that energy targets could eventually be included in future military operations. If that threat materialises, the market may price a greater probability of lost production rather than temporary shipping delays.

However, the rally is not necessarily a one-way move. Both Washington and Tehran still have economic incentives to prevent a complete and extended closure of the strait. A diplomatic agreement that restores safer passage could remove part of the current geopolitical premium relatively quickly.

The US Energy Information Administration’s baseline outlook assumes that production and trade flows will continue recovering. It forecasts global oil inventories falling by 2.2 million barrels per day during the third quarter and Brent averaging $74 per barrel over the period. That forecast could face upward pressure if the latest disruption lasts longer than expected.

What Could Drive the Next Oil Price Move?

Near-term crude prices are likely to remain highly sensitive to shipping data and military headlines. Traders will be monitoring whether non-Iranian tankers resume normal routes, whether insurers continue covering Gulf voyages and whether attacks spread to regional energy infrastructure.

Diplomatic developments will be equally important. Progress towards negotiations could pull Brent back from recent highs, while further strikes or another attack on a commercial vessel could reinforce the current risk premium.

For now, oil remains supported by uncertainty rather than a confirmed collapse in global supply. The market’s next major move will depend on whether Hormuz traffic begins to normalise or the latest security crisis develops into a longer-lasting disruption.