Oil prices plunge after Tehran announces Strait of Hormuz opening

Oil prices are plunging on global markets today after Iran announced that the Strait of Hormuz is fully open to commercial shipping. Under normal circumstances, around a fifth of the world’s oil supplies pass through the key waterway. Its blockade by Tehran following the US-Israeli attack on Iran drove prices sharply higher, with oil repeatedly topping 100 USD per barrel.

At around 15:30 CEST, North Sea Brent crude was down 10 percent to below 89.50 dollars per barrel. US benchmark West Texas Intermediate (WTI) crude was down 10.7 percent, trading at approximately 84 dollars.

Bloomberg analyst Mia Gindis said that although the latest news marks a positive development, it will take time for shipowners and charterers to agree on who will bear the risks of sailing through the strait.

US President Donald Trump nevertheless said that the United States would continue to blockade Iranian ports until a US-Iran deal was “100 percent complete”.

According to ship-tracking data, two empty liquefied natural gas (LNG) tankers are attempting to enter the Persian Gulf. If successful, this would be the first time since the conflict in the Middle East began more than a month ago that ships have entered the area through the strait, Bloomberg reported. The vessels belong to Adnoc and are likely preparing to load fuel at the company’s LNG export facility in the Persian Gulf.

According to Bloomberg, this would be a concrete sign that Iran is indeed opening the Strait of Hormuz to commercial traffic. LNG exports through the strait have been largely halted since the end of February.

The United States and Israel attacked Iran on 28 February. One reason they cited was concern that Iran could acquire a nuclear weapon. In retaliation, Tehran and its allies began attacking Israel and Arab states in the region that host US military facilities with drones, ballistic missiles and rockets. Iranian attacks also targeted civilian infrastructure, including oil facilities and commercial vessels in the Strait of Hormuz.

Last week, the United States and Iran agreed to a two-week ceasefire intended to allow talks on ending the conflict. The situation in the Strait of Hormuz has not changed significantly so far, however, although Washington had initially named this as a condition for halting the attacks. On Monday this week, the United States announced that it had begun a naval blockade of Iranian ports and coastline.

Oil prices in dollars per barrel (about 159 litres)