Oil prices have increased continuously for several days amid escalating tensions between the United States and Iran and significant disruptions to oil shipping through the Strait of Hormuz, a key global oil transit route [1, 2, 3, 4, 5, 6, 7]. Brent crude futures traded near or above $90 per barrel from August 19 to 21, reaching highs around $93.77, levels unseen since late July [1, 2, 3, 4, 5, 6, 7]. Meanwhile, West Texas Intermediate (WTI) crude also climbed to three-week highs, trading near $85 to $87 per barrel during the same period, peaking at $87.65 [1, 2, 3, 4, 5, 6, 7].
The growing geopolitical risks were highlighted when the United Arab Emirates announced a complete suspension of all financial and economic ties with Iran on August 20, further isolating Tehran and fueling market concerns [1, 3, 4, 7]. US President Donald Trump also threatened "unprecedented economic warfare and blockade" against Iran, warning nations supporting Tehran would face consequences. At the same time, Trump indicated talks with Tehran might resume "maybe at some point" [1, 3].
US Treasury Secretary Scott Bessent said a press conference on August 24 would provide details on new sanctions against Iran, aiming to tighten the economic pressure [2, 8, 7]. In the week ending August 14, US crude oil inventories rose by 4.4 million barrels, slightly easing earlier supply tightness concerns [5, 6].
Shipping traffic through the Strait of Hormuz has fallen sharply, with only seven commodity vessels crossing on August 20, half the number the day before [4]. Tankers account for the majority of transit with 29 vessels carrying over 50% of Hormuz traffic [9]. Heightened geopolitical risks, including recent attacks on ships, have pushed oil tanker charter rates and demand to historic highs, with the largest tankers’ purchase prices exceeding $130 million and one-year charters at record levels [9]. To reduce attack risks, companies including Adnoc and Kuwait Petroleum have employed shuttle tanker systems to maintain exports through the strait [9].
Iran shows no signs of relinquishing control of the Strait amid stalled negotiations and increased attacks on vessels passing through the waterway [3, 10, 11, 7]. Dennis Kissler of BOK Financial said crude futures remain supported by ongoing geopolitical tensions and the UAE's cut of financial ties with Iran due to recent missile attacks [5]. Hiroyuki Kikukawa of Nissan Securities noted the market is supported by sporadic Middle East attacks but cautioned there is little fresh momentum without major escalations [6].
Oil prices dipped about 2% on August 24 ahead of the US sanctions announcement but remained elevated during the press conference held that day [8]. With US sanctions details now public, markets will closely watch any further geopolitical developments and shipping activity through the Strait of Hormuz in the coming days.
