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NEW YORK – Oil and natural gas surged as the United States moved to blockade the Strait of Hormuz after weekend talks between Washington and Tehran failed to yield a peace deal, escalating a global energy crisis that’s rocked markets.
The price of Brent crude, the global benchmark for oil, jumped 7.7 per cent to US$102.53 a barrel as at 7.03am Singapore time. West Texas Intermediate crude, the US benchmark, soared 8.4 per cent to US$104.71.
European gas futures spiked as much as 17 per cent as at 5.52am in Singapore.
US forces will begin implementing the blockade, which applies only to vessels entering or departing Iranian ports, from 10am New York time April 13, the US Central Command said.
Global energy markets have been upended by the conflict, with higher oil and gas prices threatening to stoke inflation while slowing economic growth. Around the world, there’s now a desperate scramble among refiners and traders for immediately available crude cargoes as physical supplies tighten.
Hormuz, which links the Persian Gulf to wider markets, has been effectively closed since US and Israeli strikes on Iran began on Feb 28. Tehran has frustrated the White House by tightening its grip, imposing payments for some vessels and keeping traffic at a fraction of pre-war levels.
“It strikes me that that is quite an ambitious endeavour, and it doesn’t solve the problem of disruption,” Mona Yacoubian, director of the Middle East Program at the Center for Strategic and International Studies, said of the US blockade plan. “It’s hard to make sense of it.”
Transits through the strait had seen an uptick on April 11. On April 12, however, two vessels attempted to make their way through the narrow thoroughfare only to abruptly U-turn as negotiations in Islamabad collapsed.
US President Donald Trump threatened to retaliate in the event of resistance to the blockade. “Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL!,” he said.
If Iran does feel that its oil exports are being threatened, it may push Houthi forces in Yemen to target transit through a chokepoint at Bab el-Mandeb, at the southern entrance to the Red Sea, Ms Yacoubian said.
“Then, you really are in a world of hurt,” she said. “Experience suggests that the Iranians will not concede, but will respond in kind. That’s what we have seen over and over again.”
The breakdown in talks, confirmed by both sides, represents a significant setback after a fragile ceasefire was agreed last week. Iran characterised US demands as “excessive,” according to the semi-official Tasnim agency. US Vice-President J.D. Vance said Washington’s core goal was a commitment from Tehran not to seek a nuclear weapon, but returned home without it.
Saudi Arabia said separately on April 12 that it had restored full pumping capacity through the East-West pipeline, a vital cross-country link to the Red Sea, and output from the Manifa field. BLOOMBERG
