Oil Price Today (September 7): Crude oil approaches $100 as US, Iran strikes hit oil vessels in Hormuz. Experts weigh in

Oil prices extended their gains on Monday as fresh strikes by the U.S. and Iran on vessels in and around the Strait of Hormuz intensified fears of a prolonged disruption to Middle East oil supplies.

The latest escalation came on Saturday when U.S. forces struck three Iranian oil tankers, according to U.S. Central Command. One of the vessels was hit off the coast of Kharg Island, near Iran's key oil export hub.

Crude oil price on September 7

Brent crude futures rose 52 cents, or 0.54%, to $96.80 a barrel, while U.S. West Texas Intermediate crude gained 66 cents, or 0.72%, to $92.14 a barrel. The gains came after a sharp rally last week, with Brent climbing 8% and WTI nearly 10% as renewed U.S.-Iran attacks disrupted oil flows through the Strait of Hormuz, through which a fifth of the world's oil supply used to pass.


Iran's Islamic Revolutionary Guard Corps navy said it had targeted three oil tankers travelling through unauthorised routes in the Strait of Hormuz, along with three additional U.S. vessels in other areas.

Also read: Iran's Hormuz leverage wanes as US economic squeeze bites

The impact on shipping through the strategic waterway is already becoming visible. An average of 10 commodity ships crossed the Strait of Hormuz each day over the past 10 days, the lowest level since May, according to a Reuters report.

Iran's Supreme National Security Council secretary Mohsen Rezaei said on Sunday, according to state media, that a restricted zone would be announced outside the Strait of Hormuz in the coming days.

Time to worry?

The duration of the disruption will be critical for oil prices. JPMorgan estimates that every additional month of disruption could add around $7 to $8 a barrel to Brent prices. If the disruption lasts three months, the bank expects average monthly Brent prices to reach around $114 a barrel.

Goldman Sachs has also warned that Brent could climb to $120 a barrel if shipping disruptions through the Strait of Hormuz, the world's most important oil transit route, continue. Its base case, however, assumes that tensions in the Middle East will eventually ease.

The bank expects Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year, while cautioning that the risks remain tilted to the upside if disruptions in the Strait of Hormuz and the Red Sea last longer than expected.

Citi has raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing a longer-than-expected timeline for the reopening of the Strait of Hormuz.

Read more: Iran to tackle economic issues, says further attacks will be 'more painful'

ANZ analysts have also increased their short-term Brent forecast to $95 a barrel, warning that prices could rise further if the Middle East conflict intensifies.

They said a prolonged standoff involving calibrated military action by the U.S. and Iran appeared to be the most likely scenario and could delay the return to full Middle East supply.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)