Will Oil Prices Hit $120? Iran Threatens to "Burn Every Ship in Hormuz" [US-Iran War]

Blockade of the Strait of Hormuz Shuts Key Route Linking Major Oil Producers

Refineries in Middle Eastern Countries Also Under Attack

Prolonged Conflict Could Push Oil Prices Above $100

Crude oil prices are surging following US airstrikes on Iran. The price spike has been driven by news that Iran is moving to blockade the Strait of Hormuz, a key route for oil shipments. Some analysts are now forecasting that, if the conflict becomes prolonged, oil prices could rise above $100 per barrel.

An oil tanker subject to US sanctions was struck near the Musandam Peninsula in Oman, emitting smoke. By comparing the shape of the deck, paint, and signage, the vessel was identified as the Skylight. Although the exact time has not been confirmed, the Oman Maritime Security Center stated that the Skylight was attacked approximately 9 km from Musandam, Oman, on the 1st. According to ship tracking data, the vessel was near the Omani coast on the 28th of last month. Musandam (Oman) = Reuters Yonhap News Agency

On March 2 (local time), April West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange closed at $71.23 per barrel, up $4.21 (6.28%) from the previous session. On the London ICE Futures Exchange, May Brent crude settled at $77.74 per barrel, a jump of $4.87 (6.68%).

Oil prices soared after the Iranian regime moved to blockade the Strait of Hormuz, a crucial oil shipping lane, following US airstrikes on Iran.

On the same day, Iran's Islamic Revolutionary Guard Corps (IRGC) warned of attacks on vessels attempting to pass through the Strait of Hormuz. According to TASS, Major General Ebrahim Javari, an advisor to the IRGC commander, told Iran's semi-official ISNA news agency, "We will set fire to any ship that tries to pass through the Strait of Hormuz," adding, "Not a single drop of oil will leave this area."

The Strait of Hormuz is a strategic chokepoint connecting major oil-producing countries-including Saudi Arabia, Iran, Iraq, and the United Arab Emirates (UAE)-with the Gulf of Oman and the Arabian Sea. Around 20% of the world's daily oil consumption passes through it. According to energy consulting firm Kpler, as of last year, one-third of global seaborne oil exports transited this strait.

In addition, Iran's ongoing attacks on energy infrastructure, such as power plants and refineries in other Middle Eastern countries, have also contributed to the spike in oil prices. For example, operations at Saudi Aramco's Ras Tanura refining facility and Qatar Energy's liquefied natural gas (LNG) production facility have been halted due to drone attacks.

Market experts predict that oil prices will be determined by the duration of the conflict and the continued blockade of the Strait of Hormuz. Citigroup has set its short-term forecast for Brent crude at $85 per barrel. The firm expects Brent to trade between $80 and $90 this week, citing persistent risks to energy infrastructure and potential "disruptions" to oil flows through the Strait of Hormuz.

However, some projections suggest that if the blockade of the Strait of Hormuz is prolonged, prices could exceed $100 per barrel. JP Morgan has stated that if maritime traffic through the strait drops sharply over a three- to four-week period, Gulf oil producers may be forced to cut output, potentially driving Brent crude prices above $100 and even as high as $120 per barrel.

Edward Fishman, Senior Fellow at the Council on Foreign Relations (CFR), described the Strait of Hormuz as "the world's most important maritime chokepoint," warning that if there are sustained and significant disruptions to all shipments passing through the strait, it would have a major impact on global oil prices. He further projected that "in such a case, international oil prices could exceed $100 per barrel."

However, there are also forecasts that such concerns may be overstated. US Central Command (CENTCOM), which oversees US forces in the Middle East, stated on X (formerly Twitter) that "just two days ago, the Iranian regime had 11 vessels in the Gulf of Oman, but today they have none." The statement continued, "The Iranian regime has harassed and attacked international shipping in the Gulf of Oman for decades, but now that era is over." The Gulf of Oman is located along Iran's southern coast and is a strategic maritime area adjoining the Strait of Hormuz.

Some warn that if the blockade of the Strait of Hormuz continues for an extended period, the world could face a situation similar to the Arab oil embargo of the 1970s. Saul Kavonic, Head of Energy Research at MST Marquee, told CNBC, "This could be three times more severe than the Arab oil embargo of the 1970s and the Iranian Revolution," adding, "It could push oil prices into triple digits and send LNG prices to retest their record highs of 2022."

This content was produced with the assistance of AI translation services.