Crude oil prices pushed higher for a second consecutive session on Friday, August 7, as renewed anxieties over the Strait of Hormuz took centre stage. Oil prices gained ground following a proposal by Iran, in coordination with Oman, to restrict the passage of vessels deemed hostile and impose severe financial penalties on ships that violate the proposed rules.
Crude oil price today, August 7
Oil prices gained ground as uncertainty remains over the US war with Iran that has stifled the global flow of oil. The price of Brent crude, the international standard, climbed 99 cents, or 1.2 per cent, to $83.48 a barrel while U.S. West Texas Intermediate crude surged 85 cents, or 1.1 per cent, to $78.84 a barrel.
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What led to the oil price hike?
These gains were built on Thursday’s sharp rally – where prices jumped over $3 a barrel – driven by reports that Iranian lawmakers were assessing legislation to ban U.S. and Israeli vessels from navigating the strategic choke point Strait of Hormuz.
Before hostilities erupted at the end of February this year, the Strait of Hormuz handled roughly one-fifth of the world’s daily oil and liquefied natural gas shipments.
Oil prices surged as high as $113 during the conflict and higher prices have added more heat to inflation by raising the price of gasoline and raising costs for shipping.
Earlier this week, crude prices had retreated as market participants weighed the possibility of a diplomatic resolution to end the conflict. However, Brent surged back above the $80 threshold on Thursday after briefly coming below that benchmark for the first time since July 13.
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According to Iran’s Fars news agency, a parliamentary committee is evaluating preliminary bill that would prohibit U.S., Israeli, and other vessels, classified as hostile, from entering the waterway, while imposing fines equivalent to as much as 20 per cent of cargo value on non-compliant ships.
In addition, a senior Iranian official revealed that Tehran wants to collect transit fees ranging from 5 per cent to 7 per cent of cargo value, while Oman is proposing a 3 per cent charge and the United States maintains that no fees should be levied.
Industry sources noted that enforcing such fee structures would face major hurdles due to U.S. sanctions and maritime insurance clauses that prohibit such payments.
Compounding regional risks, Yemen’s Houthis said they launched missile and drone strikes targeting Saudi military deployments in Marib and Hadramout on Thursday, even as U.S. President Donald Trump indicated to reporters that he believes the war would end soon.
