Osmond ChiaEconomic journalist
Reuters
Oil prices rose above $100 per barrel on Monday after US President Donald Trump ordered a blockade of Iranian ports following the failure of peace talks.
Brent crude, the global oil price benchmark, jumped 7% to $102.30 (£76.32), while West Texas Intermediate rose 8.7% to $104.94.
The price of a barrel of oil had dipped well below $100 last Wednesday after the United States and Iran reached a two-week conditional ceasefire agreement that included the opening of the Strait of Hormuz, a key maritime route for global oil and gas supplies.
The strait, through which a fifth of the world’s energy shipments pass, became a flashpoint in the conflict after Iran responded to U.S.-Israeli strikes by threatening to attack ships that tried to use the waterway.
Shipments have largely stalled since the war between the United States, Israel and Iran began on Feb. 28, leading to higher energy prices. increasing worldwide and increase costs for consumers, in particular by making gasoline and diesel more expensive.
However, Iran continued to export oil.
Windward, the maritime intelligence company, reported that since March 1, more than 58 million barrels of oil have left Kharg Island, Iran’s main outlet for crude exports. He said more than 90% of them were headed to China.
On Sunday, Trump announced that “effective immediately,” the U.S. Navy “will begin the process of BLOCKING all vessels attempting to enter or exit the Strait of Hormuz.”
The US Central Command later announced it would block all ships entering and leaving Iranian ports and coastal areas of the strait from 10:00 a.m. EST (3:00 p.m. BST) on Monday.
He said the blockade would not apply to ships transiting the Strait of Hormuz to and from non-Iranian ports.
Will the ceasefire hold?
Chua Yeow Hwee, an economist at Singapore’s Nanyang Technological University, said: “Oil prices are likely to remain high because expectations now depend on the blockade being fully implemented, shipping disruptions spreading and diplomacy resuming.”
Analyst Saul Kavonic of financial services firm MST Marquee told the BBC that “oil prices are not as high as they normally would be” given the scale of the supply disruptions, as traders are still hopeful that shipments will resume soon.
“But if that doesn’t happen, oil prices will rise,” Kavonic added.
There is also the question of whether the two-week ceasefire will hold, according to Marcus Baker, global head of high-risk marine and cargo insurance company Marsh.
Iranian Parliament Speaker Mohammad Bagher Ghalibaf, who led negotiations for Tehran in Pakistan this weekend, said the country “will not submit to any threat,” in a statement carried by local media.
The naval forces of Iran’s Islamic Revolutionary Guard Corps (IRGC) said any military vessel approaching the strait would be considered violating the ceasefire between Washington and Tehran and “dealt with harshly.”
Baker said: “Will the Iranians decide that in fact, despite what the United States has said, they will continue to honor the ceasefire?
“Obviously, if that happens, we’ll get a lot more confidence back in the market and I think the sustainability of that ceasefire is really critical going forward.”
Major Asian stock indices fell on Monday, with Japan’s Nikkei 225 down 0.7% and South Korea’s Kospi down 1%.
Asian countries have been particularly affected by the consequences of the war in Iran, as they rely heavily on oil from the Middle East.
