Oil nears $100 as war threatens Strait of Hormuz supply route

Global oil prices surged to their highest levels since autumn 2023 as mounting fears of disruptions to energy supplies intensified amid the escalating conflict in the Middle East and the effective closure of the Strait of Hormuz.

During the latest trading session, US oil prices jumped another 12% to reach $90.85 per barrel, putting the market on track for its largest single-day gain since May 2020. Earlier in the previous session, oil had traded as high as $91.09 per barrel, marking the highest intraday level since October 2023, as per CNN data.

The rally reflects growing anxiety among investors about the stability of global energy supplies. “Investors have shifted from complacent to panicked. And we are about to reach the moment of panic,” Bob McNally, president of Rapidan Energy Group, said in a telephone interview with CNN on Friday.

Brent crude, the international benchmark, also rose sharply, climbing 8% in the latest trading to $92.50 per barrel.

Initially, traders reacted calmly to the effective shutdown of the Strait of Hormuz, one of the world’s most important energy chokepoints. However, concerns are now mounting that the vital waterway may remain closed for an extended period.

Around 20% of the world’s oil supply normally passes through the Strait of Hormuz. But the war involving the US, Israel and Iran has effectively blocked the route, raising fears of prolonged supply disruptions.

“If the market doesn’t believe that these tankers are passing through the Strait of Hormuz and doesn’t actually see them moving through the strait, we’ll break past $100 and keep going until a recession sets in,” McNally warned. He previously served as an energy adviser to former US President George W. Bush.

Oil prices in the United States have risen 36% over the course of this week. According to data compiled by FactSet going back to 1983, the surge could become the largest weekly increase on record.

By Tamilla Hasanova