On Monday, oil markets experienced significant volatility as concerns escalated over the potential closure of the Strait of Hormuz by Iran. Brent crude prices initially surged by 5.7%, reaching $81.40 per barrel—a five-month high—before stabilizing later in the day at around $77.20 per barrel.
Iran’s Deliberations and Potential Global Economic Impact
According to Iranian state television, the country’s parliament has approved a proposal to shut down the Strait of Hormuz, although the final decision rests with Iran’s Supreme National Security Council.
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The Strait of Hormuz, a critical maritime chokepoint situated between the Persian Gulf and the Gulf of Oman, measures just 33 kilometers wide at its narrowest point. It serves as a vital passage for oil shipments from major producers like Saudi Arabia, the United Arab Emirates, Kuwait, and Iran to international markets.
Ole Hansen from Denmark’s Saxo Bank noted that oil traders are closely monitoring Iran’s next move in response to recent U.S. and Israeli attacks. Analysts at Goldman Sachs told Reuters that should Iran proceed with closing the Strait, Brent crude prices could potentially surge past $110 per barrel, triggering renewed turbulence in global oil markets. The situation remains fluid, with the potential for serious global economic consequences if this vital oil route is indeed blocked.
