Global oil prices have, to the surprise of some, edged lower today — well, at least at 12:25pm AEDT, they are a bit softer.
Here’s IG analyst Tony Sycamore’s explanation.
Over the weekend, US forces struck military sites on Iran’s Kharg Island — the country’s primary oil export terminal, handling over 90% of its crude shipments. President Trump announced the strikes had successfully destroyed military targets, thankfully sparing oil infrastructure for now, but warned of further action if Iran continues to block the Strait of Hormuz.
Following these strikes, Iran’s Foreign Minister is reported to have said in an interview with MS Now (an American cable/news channel), the Strait of Hormuz is open to all nations except the United States, Israel, and their allies.
While the definition of “allies” remains vague, the implication is that non-allied nations — likely including China, perhaps India and other countries — will have access.
This context is crucial: China and India alone account for approximately 50% of all oil that normally transits the Strait of Hormuz.
Additionally, Saudi Arabia’s East-West pipeline is rerouting 7 million barrels per day, bypassing Hormuz entirely, with reports indicating tankers are lined up ready to collect this redirected cargo.
Further mitigating factors include the Strategic Petroleum Reserve (SPR) release is expected to commence late next week, and reports that the US intends to announce a coalition this week to escort ships through the Strait.
Collectively, these factors suggest the prospect of a complete ‘closure’ looks considerably overstated.