As US-Iran tensions rise and ship traffic through the Strait of Hormuz slows, ING strategists Warren Patterson and Ewa Manthey point to dramatically higher oil prices. They point out that ICE Brent has surged back above $83/bbl, creating a great deal of uncertainty to the energy markets and shipping prices due to threats of attacks, the US's renewed blockade of Iran, and dueling toll proposals from Iran and President Trump.
Brent protests the disruption of Hormuz
"Yesterday saw a sharp increase in oil prices, with ICE Brent closing the day 9.6% higher and back above $83/bbl. There is little indication that tensions between the US and Iran will lessen, and this strength has persisted into early morning trade today.
"The United States still maintains that the Strait of Hormuz is open. However, ships will find little solace in these remarks given the increasing likelihood of an attack.
"The cost of crossing the Strait of Hormuz is the other layer of uncertainty for markets. It is clear that Iran insists on imposing a toll."
However, according to President Trump, the United States would levy a fee equal to 20% of the value of a cargo in order to provide vessels with safe passage. There are not many specifics about how this would operate or how serious Trump is about it.
"A 20% tax on a VLCC carrying 2 million barrels at $80 per barrel would be almost $32 million, or an extra $16 per barrel. This is much more than the $1/bbl toll that Iran has been asking.
Brent protests the disruption of Hormuz
"Yesterday saw a sharp increase in oil prices, with ICE Brent closing the day 9.6% higher and back above $83/bbl. There is little indication that tensions between the US and Iran will lessen, and this strength has persisted into early morning trade today.
"The United States still maintains that the Strait of Hormuz is open. However, ships will find little solace in these remarks given the increasing likelihood of an attack.
"The cost of crossing the Strait of Hormuz is the other layer of uncertainty for markets. It is clear that Iran insists on imposing a toll."
However, according to President Trump, the United States would levy a fee equal to 20% of the value of a cargo in order to provide vessels with safe passage. There are not many specifics about how this would operate or how serious Trump is about it.
"A 20% tax on a VLCC carrying 2 million barrels at $80 per barrel would be almost $32 million, or an extra $16 per barrel. This is much more than the $1/bbl toll that Iran has been asking.
