Oil prices have surged as rising tensions in the Strait of Hormuz threaten the fragile ceasefire between the United States and Iran. Brent Crude, the global benchmark for oil prices, climbed 6 percent on Monday to reach $114.44 a barrel before easing slightly to $113.54 on Tuesday morning, according to Al Jazeera.
Escalation in the Middle East
The conflict in the Middle East escalated on February 28 when the US and Israel conducted joint strikes on key Iranian sites. Iran retaliated by striking targets across the region and closing the critical Strait of Hormuz, through which 20% of globally traded oil passes. In response, the US implemented a blockade on Iranian ports in the strait to pressure the Iranian economy and lift the closure. President Donald Trump stated that the US would guide commercial vessels from non-conflict countries out of the trade route, but markets remain anxious.
Iranian Attacks on UAE
On Monday, May 4, the United Arab Emirates reported that it had engaged multiple missiles and drones launched from Iran. The defence ministry confirmed that its air defence systems intercepted 12 ballistic missiles, three cruise missiles, and four drones. One missile struck a petroleum site in the eastern emirate of Fujairah, and a drone sparked a fire at the site, according to Fujairah's Media Office. Plumes of grey smoke were seen rising above the Fujairah Oil Industry Zone.
US Military Response
The US military announced that it had destroyed six of Iran's small boats in response to Iranian attacks on commercial vessels. Analysts noted that the market is factoring in more oil infrastructure damage and a higher likelihood of an extended closure of the Strait of Hormuz, driving oil prices higher.
Maritime Incidents
The United Kingdom Maritime Trade Operations reported that a ship was struck 36 nautical miles north of Dubai, with a fire breaking out in the engine room. All crew members are accounted for. The International Maritime Organisation stated that up to 20,000 seafarers remain stranded on approximately 2,000 vessels in the Strait of Hormuz, with no substantial resumption of maritime traffic in the region.
