Oil prices jump by 10% as tanker movement comes to a standstill near the Strait of Hormuz following Iranian assaults, with the IRGC cautioning ships not to proceed. ‘Our vessels will remain stationary’

Oil Markets Respond to Escalating Tensions in the Middle East

Global energy markets are beginning to show the impact of the recent U.S. and Israeli airstrikes targeting Iran, as Iran intensifies its retaliatory actions in the region.

On Sunday, Brent crude surged by 10%, trading near $80 per barrel in over-the-counter markets, according to oil traders cited by Reuters. This sharp increase followed a week of rising prices, with Brent closing at $73 per barrel on Friday—its highest level in seven months—as geopolitical tensions escalated ahead of the initial strikes.

Iran’s Role in Global Oil Supply

Last year, Iran produced approximately 4.7 million barrels of oil daily, representing 4.4% of the world’s total supply. A significant portion of these exports, often circumventing sanctions, is shipped to China using a so-called shadow fleet.

Risks Surrounding the Strait of Hormuz

The greatest concern for the oil market centers on the possibility of Iran blocking the Strait of Hormuz, a crucial maritime passage through which about 20% of the world’s oil is transported. Analysts warn that any attempt by Iran to close this chokepoint could drive oil prices up to $100 per barrel.

Although Iran has not yet taken direct action to obstruct the strait—such as deploying underwater mines—many vessels are already steering clear of the area.

Shipping Activity and Precautionary Measures

Data compiled by Reuters indicates that hundreds of oil and LNG tankers have anchored or remain stationary near the Strait of Hormuz. This follows decisions by tanker operators, major oil companies, and trading firms to halt shipments through the strait as a safety measure over the weekend.

“Our ships will stay put for several days,” a senior executive at a leading trading firm told Reuters.

Additionally, Greece’s shipping authorities have advised vessels to avoid the Persian Gulf, Gulf of Oman, and the Strait of Hormuz. Shipping giant Maersk has also announced a suspension of all transits through the strait until further notice.

Reports suggest that the Islamic Revolutionary Guards Corps has issued warnings prohibiting passage through the strait, and at least two vessels have been struck near the area, though the source of these incidents remains unclear.

Official Statements and OPEC+ Response

Iran’s foreign minister stated on Sunday that the country currently has no plans to close the Strait of Hormuz or disrupt maritime navigation in the region.

Meanwhile, OPEC+ has agreed to raise oil production, planning an increase of 206,000 barrels per day in April, up from the previous monthly increment of 137,000 barrels. However, most OPEC+ members, aside from Saudi Arabia, have limited capacity to further boost output.

Economic Implications

William Jackson, chief emerging markets economist at Capital Economics, noted that a 5% annual increase in oil prices typically adds about 0.1 percentage point to inflation in major economies. If Brent crude were to reach $100 per barrel, global inflation could rise by 0.6 to 0.7 percentage points.

He further commented, “This could slow the pace of monetary easing by major central banks, especially in emerging markets, where policymakers are particularly sensitive to fluctuations in commodity prices.”

This article was originally published on Fortune.com