Oil Surges Above $83 as Strait of Hormuz Deadlock Fuels Geopolitical Risk Premium

Oil Surges Above $83 as Strait of Hormuz Deadlock Fuels Geopolitical Risk Premium​

Oil prices extended their upward momentum for a second consecutive session on Friday, driven by escalating geopolitical concerns surrounding the critical Strait of Hormuz. Fresh reports detailing Iranian proposals to restrict hostile vessel traffic have tightened global supply fears, pushing crude oil futures higher. The waterway, which handles approximately one-fifth of all global oil and liquefied natural gas shipments, remains a central point of international tension following the proposed transit regime changes.

Geopolitical Tensions Rise Over Strait of Hormuz Regulations​

The market gains followed reports that Iran is reviewing legislation intended to prohibit U.S., Israeli, and other vessels designated as hostile from transiting the waterway. The preliminary bill seeks to impose significant penalties on ships found violating these restrictions. Tehran has also reportedly signaled a demand for transit fees ranging from 5% to 7% of cargo value for those utilizing the strait.

Meanwhile, Oman is negotiating lower fees, estimated around 3%, while the United States maintains that no fees should be charged by any party. Industry sources suggest that implementing such an agreement would be exceedingly difficult due to existing U.S. sanctions and specific insurance clauses that restrict certain payments. This maritime dispute adds weight to ongoing regional instability.

Market Reaction Amid Broader Regional Instability​

Crude oil futures responded strongly to the renewed tensions. Brent crude futures climbed 99 cents, or 1.2%, settling at $83.48 a barrel. U.S. West Texas Intermediate (WTI) crude also gained notably, rising by 85 cents, or 1.1%, reaching $78.84 a barrel. These advances come after oil had previously risen over $3 a barrel on Thursday following the disclosure of Iran's review process.

Adding to the maritime concerns, escalating military activity was reported from Yemen. Houthi forces launched missile and drone attacks against Saudi deployments in Marib and Hadramout on Thursday, further intensifying regional risks. President Donald Trump had previously stated that he believed the wider conflict would eventually reach a resolution.

Analyst Views: High Near-Term Risks Offset by Long-Term Supply Outlook​

Financial analysts are emphasizing that the immediate trajectory of oil prices hinges entirely on how long these supply disruptions persist. JPMorgan estimates that every additional month of disruption could push Brent crude upward by approximately $7 to $8 per barrel. If such instability lasts for three months, the bank projects average monthly Brent prices reaching around $114 a barrel.

Goldman Sachs has cautioned that if shipping disruptions through the vital Strait of Hormuz continue, Brent could climb toward $120 a barrel. However, the brokerage’s base case assumes that tensions in the Middle East will eventually ease. Under this scenario, Goldman Sachs anticipates Brent averaging $80 a barrel during the fourth quarter and $75 a barrel next year.

In contrast, Kotak Securities maintains a cooling outlook for oil through 2027. Anindya Banerjee, Head of Commodity Research at Kotak Securities, noted that expanding supply outside the conflict zone is likely to temper price action. This expectation is supported by OPEC+ raising production targets, record output from the UAE, and non-OPEC barrels responding actively to market prices.