Oil Prices Rise For Fourth Session As Strait Of Hormuz Uncertainty Keeps Supply Risks Elevated

Mumbai, August 19: Oil prices extended gains for a fourth straight session on Wednesday as conflicting signals from the United States and Iran over the status of the Strait of Hormuz kept markets on edge and raised concerns over disruptions to crude exports. Brent crude was trading above $91 a barrel, with investors closely monitoring developments around the key shipping route amid fading hopes of a near-term diplomatic breakthrough. 

Brent, WTI Extend Rally 

Brent crude futures rose 0.8% to $91.8 a barrel, while US West Texas Intermediate crude gained 0.9% to $85.7 a barrel. Both contracts had settled at their highest levels since July 24 in the previous session, as hopes for a peaceful resolution between Washington and Tehran weakened. 

The latest move higher extends a recovery in crude prices as traders price in the possibility of prolonged disruption to supplies moving through the Middle East. The Strait of Hormuz is one of the world’s most important oil shipping routes, making any sustained interruption a major risk for global energy markets. 

Conflicting Signals From US, Iran 

Both contracts continued to advance on Middle East uncertainty. Source: Oilprice.com

The immediate focus remains on the conflicting claims from Washington and Tehran over whether shipping through the Strait of Hormuz is possible. 

US President Donald Trump said on Tuesday that no talks were taking place with Iran and insisted the Strait of Hormuz remained open. Iran, however, has maintained that the strategically important waterway remains closed to shipping. The conflicting statements have left energy traders uncertain about the extent to which crude exports can resume normally. 

The uncertainty has intensified following the expiry of a temporary ceasefire agreement on Monday. A senior Iranian official told Reuters that Tehran was moving towards a more confrontational position amid the diplomatic stalemate, although there were no reports of fresh strikes by either side on Tuesday. 

Also Read: How To Invest In Crude Oil

Alternative Export Routes In Focus 

The disruption has already prompted oil-producing countries and shipping companies to explore alternatives to the Strait of Hormuz. 

Iraq’s cabinet approved mechanisms allowing Iraqi crude to be exported through specialised international and local companies and via multiple outlets, according to a government statement. The arrangements are expected to operate for three months beginning September 1. 

Meanwhile, two major Chinese shipping companies have stopped sending oil tankers through the Strait of Hormuz and the Bab al-Mandeb strait because of the conflict. Instead, they are collecting oil cargoes outside the Gulf, according to industry executives, tanker trackers and a ship broker cited by Reuters. 

The shift highlights how geopolitical risks are beginning to influence actual shipping decisions, rather than merely adding a temporary premium to crude prices. Any prolonged diversion of tankers could increase transportation costs and extend delivery times for buyers. 

US Inventory Data Awaited 

Apart from geopolitical developments, traders are also awaiting fresh US inventory data for indications of the underlying supply-demand balance. 

Reuters sources cited data from the American Petroleum Institute showing that US crude oil and distillate inventories declined last week, while gasoline stocks increased. Official figures from the US Energy Information Administration are due later on Wednesday. Analysts polled by Reuters expect US crude inventories to have fallen by around 600,000 barrels in the week ended August 14. 

A larger-than-expected drawdown could provide additional support to crude prices by signalling tighter domestic supplies, while a surprise build could temper some of the recent gains. 

What Higher Oil Prices Mean For India 

The sustained rise in crude prices is particularly important for India, one of the world’s major oil-importing economies. A prolonged period of crude prices above $90 a barrel could increase the country’s import bill and put pressure on the rupee, while also complicating the inflation outlook. 

Higher energy costs can also squeeze margins across oil-dependent industries, including aviation, paints, chemicals, tyres and logistics, if companies are unable to fully pass on the increase to consumers. Conversely, upstream oil producers could benefit from stronger crude realisations. 

For Indian equities, the oil rally therefore adds another layer of uncertainty at a time when global markets are already dealing with elevated bond yields and a broader risk-off mood. If supply disruptions persist and crude prices move further higher, investors could increasingly favour energy producers and defensive sectors while remaining cautious on oil-consuming businesses. 

For now, the direction of crude prices will remain closely tied to developments around the Strait of Hormuz. With diplomatic uncertainty unresolved and shipping companies already changing routes, any signs of a prolonged closure could push the geopolitical risk premium in oil higher, while a credible reopening of the waterway could ease some of the recent gains. 

Source

• oilprice.com