Brent crude initially climbed to above $97 a barrel on Wednesday before retreating as traders balanced the threat of further supply disruption against signs that some physical flows were continuing. Reuters reported that Brent reached $97.04 before falling towards $94.08, while US West Texas Intermediate briefly touched $92.29 before easing to around $89.50.
The volatility reflects a market attempting to price an uncertain physical threat. The Strait of Hormuz remains one of the world's most important energy chokepoints, linking Gulf producers with international markets. Any sustained restriction on shipping would affect not only crude oil but also refined products and liquefied natural gas.
The latest military escalation has already affected shipping behaviour. Preliminary Kpler data showed only four commodity vessels passed through the Strait on Tuesday, compared with about 13 on average over the previous 10 days.
Two supertankers carrying Saudi oil were also struck by unknown projectiles on Tuesday, reinforcing concerns among shipowners and energy traders over the security of commercial traffic.
Yet the market is not facing an immediate physical shortage of the same magnitude implied by the price reaction. US Energy Secretary Chris Wright said approximately 17 million barrels of oil transited the Strait on Monday, suggesting that some significant flows remain possible despite the deteriorating security environment.
The key issue is therefore duration.
If shipping remains impaired for several weeks, refiners in Asia could face higher procurement costs, while import-dependent economies would confront renewed inflationary pressure. If disruption becomes more comprehensive, the resulting supply deficit could push Brent beyond $100.
The implications would extend into monetary policy. Higher energy prices raise headline inflation and complicate central-bank efforts to balance economic growth against price stability.
For investors, the Strait has therefore become more than a geopolitical flashpoint. It is now a critical variable in the outlook for global inflation, interest rates and economic growth.
