Brent crude surges as Hormuz shipping grinds to a halt

Brent crude oil surged to $88.10 per barrel on Friday, July 17, its strongest daily gain in months, as renewed fighting between the United States and Iran throttled shipping through the Strait of Hormuz while Russia's ban on diesel exports entered its second week.fortune+2

The price spike marks a dramatic reversal from mid-June, when Brent had dropped below $78 per barrel following a U.S.-Iran memorandum of understanding. Brent has now risen roughly 18% from its early July lows around $72.68, erasing all gains from the short-lived diplomatic progress.finance.yahoo+1

Hormuz Blockade Halts Tanker Traffic

Only three commodity vessels crossed the Strait of Hormuz on Thursday, the fewest daily transits since May, according to Reuters Thomson Reuters Corporation ↗ 3.37%, with most ships halting or making U-turns after renewed Iranian attacks on vessels and the resumption of a U.S. naval blockade on Iran-related shipping. No very large crude carriers or LNG tankers passed through the strait for a second consecutive day.reuters

The re-escalation began after the U.S. launched waves of attacks on Iran on July 13, prompting Tehran to close the strait again. Oil jumped more than 9% that day alone, with Brent settling at $83.30. The U.S. reinstated a naval blockade on July 14.thenationalnews

Russia's Diesel Ban Compounds the Crisis

Russia's diesel export ban, which took effect on July 8 and runs through July 31, has further squeezed global fuel markets. The Moscow Times reported the ban was introduced after systematic Ukrainian drone strikes knocked out more than 40% of Russia's oil refining capacity. Diesel and gasoil loadings from Russia fell to just 234,000 barrels per day in early July, down from 400,000 bpd in June, according to Reuters.themoscowtimes+3

In the United States, GasBuddy analyst Patrick De Haan warned on July 14 that gasoline prices would reach $4 per gallon within days and diesel would hit $5 per gallon by week's end. Across Europe, diesel prices have risen sharply, with EU countries like Denmark already above €2 per litre and Portugal expecting diesel to reach nearly €1.99 per litre next week.fuel-prices+2

Analysts Warn of Further Escalation

Earlier this year, Citi Citigroup Inc. ↗ 0.84% warned that Brent could spike to $150 per barrel if Hormuz disruptions persisted, with average prices near $130 in the second and third quarters. Capital Economics similarly projected prices could reach $140 if OECD oil inventories continued to deplete. While the June ceasefire briefly eased those fears, the renewed escalation has put such scenarios back in play.energynow+1

The EIA's July forecast projected Brent averaging $74 per barrel in the third quarter — a figure now well below current trading levels, underscoring how rapidly conditions have deteriorated.rigzone