Oil prices jumped by 8% early on Tuesday as markets brace for a prolonged conflict in the Middle East and fears of supply disruptions began to materialize.
As of 7:00 a.m. ET on Tuesday, the international benchmark, Brent Crude, had jumped by 8.36% to $84.24.
The U.S. benchmark, WTI Crude, moved up past the $75 per barrel threshold and traded at $76.93, up by 8% on the day.
After a 10% jump on Monday, oil prices continued their upward trajectory on Tuesday after U.S. President Donald Trump said that the war in Iran, the military operation dubbed Epic Fury, could take longer than the initially projected four weeks.
“Whatever it takes. … Right from the beginning, we projected four to five weeks, but we have capability to go far longer than that,” President Trump said late on Monday.
Meanwhile, Iran, in retaliation for the U.S.-Israeli strikes, said it is closing the Strait of Hormuz and vowed to burn any ship trying to transit the narrow lane between Iran and Oman where a fifth of global oil and gas trade passes.
Iran on Monday claimed that the Strait of Hormuz has been closed.
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Ebrahim Jabbari, a senior adviser to the Commander-in-Chief of Islamic Revolutionary Guard Corps (IRGC), was quoted as saying that Iran would “attack and set ablaze any ship attempting to cross.”
“The Strait is closed. If anyone tries to pass, the heroes of the Revolutionary Guard and the regular navy will set those ships ablaze,” Jabbari was quoted as saying.
The U.S. Central Command denies the Strait is closed, a senior U.S. military official told Fox News.
Regardless of the official ‘closed’ or ‘open’ status of the Strait of Hormuz, tanker traffic is effectively halted as no shipper, trader, or oil company ventures to test how serious Iran’s threats are.
Analysts say that oil prices could easily hit $100 per barrel, or even $120 a barrel if traffic through the Strait is not normalized to some extent within three weeks.
By Michael Kern for Oilprice.com
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