Oil prices rose after Iran began stopping ships in the Strait of Hormuz, a corridor that carries about one-fifth of the world's oil shipments. Exxon Mobil and Chevron warned the conflict could keep fuel prices elevated for a sustained period, with Brent crude already near $120 a barrel. Traders are pricing a rising, though still uncertain, chance that crude reaches new all-time highs by year-end.
Iran has begun stopping ships from transiting the Strait of Hormuz, and oil prices surged following the announcement. The strait carries about one-fifth of the world's oil shipments, so a disruption there can have significant implications for global oil supply.
Iran's move tightens supply routes
The move comes amid ongoing tensions in the region that have previously driven fluctuations in oil prices. That has fed concerns about a potential tightening of crude supply routes, concerns already showing up in prices.
That tension, as Reuters reports it, appears supportive of scenarios in which crude might reach new all-time highs, and market pricing shows some consistency with that outcome. Still, current pricing for July assigns only a low probability to WTI reaching $130.
Exxon, Chevron warn of sustained high fuel prices
Exxon Mobil and Chevron warned that fuel prices could stay elevated for a sustained period because of the conflict, citing a Reuters report. The disruption has already pushed Brent crude to about $120 a barrel. The bottleneck is affecting up to 20% of the world's crude and natural gas supply.
Higher prices have lifted upstream earnings at both companies, though the conflict has also created production challenges and added to market volatility.
Traders price a rising chance of new highs
Market pricing now shows a moderate probability that crude oil reaches new all-time highs by the end of the year, with that probability increasing further toward December. The December 31 market contract is currently priced at 14.5% YES, reflecting growing expectations that oil keeps climbing as the year progresses.
Beyond the pricing data, officials at OPEC and the International Energy Agency, including Secretary General Mohammad Sanusi Barkindo and Executive Director Fatih Birol, may offer insight into potential production adjustments as the conflict continues.
Sources: Crypto Briefing, Crypto Briefing
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