Oil Prices Rise as US-Iran Conflict Disrupts Strait of Hormuz Shipping

Oil prices rose Tuesday as renewed conflict between the United States and Iran triggered attacks on tankers and reduced shipping through the Strait of Hormuz. U.S. benchmark WTI crude traded at about $79 per barrel, up from about $74 at the start of trading Monday morning and about $72 late last week.

Iran attacked oil tankers over the weekend and once early Tuesday morning. The United States retaliated by striking facilities in Iran.

Iran also fired at a commercial ship in the Strait of Hormuz over the weekend and hit targets in Jordan and Qatar. The United Arab Emirates stated that Iran struck its tankers and killed a crew member on Monday. Strikes continued into Tuesday.

President Trump said Monday that the United States would impose a blockade on the Strait of Hormuz and that the U.S. should be the guardian of the waterway. He initially said he would impose a 20 percent toll on ships exiting the strait but later stated he would replace the fee with trade and investment deals from Gulf states.

Confirmed crossings of the Strait of Hormuz fell by about 52 percent week over week between Friday and Sunday, according to MarineTraffic.com. Crossings continued to decline on Monday. Prior to the conflict, about 20 percent of the world’s oil transited the strait.

Gasoline prices are expected to go back above $4 a gallon and diesel prices are expected to head back to over $5 a gallon over the next seven to 10 days, Andy Lipow said. As of Tuesday, the average U.S. gasoline price was about $3.86 per gallon, according to AAA.