Oil prices extended their sharp rally on Friday, with Brent crude futures up 4 cents to $76.34 per barrel and US West Texas Intermediate (WTI) crude gaining 7 cents to $72.15, as reported by The Economic Times. The latest rally came after Iranian armed forces launched attacks on US military infrastructure in Gulf states on Thursday following US strikes on Iran's southern coastal and eastern provinces, further straining a three-week-old ceasefire. For the week, Brent was set for a gain of about 6% and WTI was headed for about a 5% increase, maintaining the substantial risk premium despite some market confidence in diplomatic efforts. Vandana Hari, founder of oil market analysis provider Vanda Insights, noted that "Prices have backed off the mid-week highs, but there is still a substantial risk premium as Hormuz transits are back to a near-standstill with no clear signs on when normal reopening might resume."
The renewed fighting has once again put the Strait of Hormuz — the key waterway connecting Persian Gulf oil producers with global markets — at the centre of the crude market. Tanker traffic through the strait on Thursday was at a near standstill, according to ship-tracking data, as vessel owners assessed the risk from the latest strikes, as reported by The Economic Times. This compares to a daily average of 18 over the first seven days of July, representing a dramatic decline in maritime traffic through the critical chokepoint. The renewed fighting has delayed the full reopening of the Strait of Hormuz, which carried about 20% of daily global oil and gas supplies before the war. The global energy market has been jolted this week by the resurgence in fighting in the Middle East, with futures partially retracing some of the losses seen in the second quarter. Industry experts believe shipping activity through the Strait of Hormuz is unlikely to return to normal anytime soon, involving coordinated vessel movements, restarting oil production, repairing damaged infrastructure and reaching agreements on de-mining operations.
The US military has significantly intensified its response with US forces completing an additional round of strikes against Iran on July 8, to further degrade Iran's ability to attack commercial shipping and innocent civilian mariners in the Strait of Hormuz, according to a statement by the US Central Command. US forces struck approximately 90 Iranian military targets, including air defence systems, coastal surveillance assets, missile and drone storage sites, naval capabilities, and military logistics infrastructure along Iran's coastline. The latest strikes follow successful execution of offensive strikes in Iran the night before, hitting approximately 80 Iranian military targets July 7, including more than 60 Islamic Revolutionary Guard Corps small boats, to impose heavy costs for Iran violating the ceasefire by attacking three commercial vessels navigating the Strait of Hormuz. The US military later confirmed it had launched another round of attacks targeting Iran, saying the operation was aimed at ensuring the strategic Strait of Hormuz remained open for maritime traffic. According to the US, the latest military action was a response to Tuesday's attacks on three tankers passing through the Strait of Hormuz, with strikes triggering disruptions across several cities along Iran's southern coast, including power outages in some areas. Iranian media reported multiple explosions across southern Iran, including Bushehr, where one of the country's nuclear plants is located.
Saudi Aramco Chief Executive Officer Amin Nasser warned that any prolonged disruption in the Strait of Hormuz could delay the return of stability to global oil markets until 2027, according to The Economic Times. He said an extended disruption could impact nearly 100 million barrels of oil supply every week, with Saudi Aramco being the world's largest oil producer. Analysts also pointed out that global oil inventories were drawn down during the prolonged disruption to shipping through the strait and would take time to recover. They expect stockpiles to remain under pressure until additional crude supplies from the Gulf begin reaching international markets. Several shipowners also remain reluctant to resume operations in both the Strait of Hormuz and the wider Persian Gulf, adding to the supply chain disruptions. U.S. President Donald Trump said on Wednesday that he did not believe the war would resume, adding that "anything that happens is going to be over very quickly," though the latest developments suggest continued military tensions.
Global markets showed mixed early trading as investors reacted to the fresh escalation in Iran-US tensions. US markets were mixed with S&P 500 futures rising 0.1% while Dow futures fell 0.1% and Nasdaq futures gained 0.5% before the opening bell. European markets experienced varied movements with Britain's FTSE 100 falling 0.7%, France's CAC 40 rising 0.3%, and Germany's DAX trading 0.1% higher at midday. Asian markets showed mixed signals with Tokyo's Nikkei 225 gaining 1.4% to 67,743.85, reversing earlier losses, while South Korea's Kospi index ended 0.6% higher at 7,291.91 despite earlier declines. China's Shanghai Composite index traded 1.7% higher at 4,036.59, even as China's producer price index rose 4.1% in June compared to a year earlier, with some economists attributing higher inflation to impacts from the Iran war. Hong Kong's Hang Seng shed 0.7% to 24,030.18, while Australia's S&P/ASX 200 declined 0.3% to 8,762.50. Daniel Hynes, senior commodity strategist for ANZ bank, noted that "Despite the U.S. ramping up attacks on military sites in Iran, the market drew some reassurance from the Trump administration's decision to avoid targeting Iranian energy infrastructure," adding that "this was aided by comments from President Trump, who said he doesn't expect a return to a full-scale conflict."
