Iranian Bill To Bar US And Israeli Ships From Hormuz Lifts Oil Prices
Oil prices rose more than three dollars a barrel after reports that a committee of the Iranian parliament is reviewing draft legislation that would bar American and Israeli vessels from the Strait of Hormuz and fine violators up to a fifth of the value of their cargo. Brent crude gained 3.09 dollars, or 3.89 percent, to 82.54 dollars, while the American benchmark rose 2.49 dollars, or 3.31 percent, to 77.71.
An Iranian lawmaker described the measure as a preliminary bill covering American, Israeli and other vessels deemed hostile, with penalties of up to twenty percent of cargo value. Before the conflict began in late February, around a fifth of global daily oil and liquefied natural gas supply passed through the strait. Crude and condensate exports from Gulf countries were broadly steady through July and remain roughly forty percent below pre-war levels, which is the measure of how much the corridor has already been constrained without any formal prohibition.
The market reaction was amplified by activity at the other end of the Arabian peninsula. Houthi forces said they had conducted missile and drone attacks on Saudi positions, and separately claimed missile attacks on a Saudi oil tanker off the Red Sea port of Yanbu and on another in the Gulf of Aden, neither of which was confirmed by Saudi authorities. A trader quoted on the day observed that the attacks serve as a reminder the Red Sea passage remains at risk, which matters because it is the route cargoes take when the Gulf is unavailable.
Analysts were divided on how much weight to attach to the legislation. One noted that traders remain focused on the state of negotiations between Washington and Tehran and that prices tend to fade back when talks drag on without resolution. Another observed that the Houthi campaign has not so far significantly disrupted oil and gas supply, while cautioning that this could change if attacks escalate. Saudi Arabia has slightly reduced its official selling price for Arab Light crude to Asia for September, a signal that the producer sees competition for Asian buyers rather than scarcity.
A bill at committee stage is a long way from an enforceable prohibition, and Iran's ability to police flags in a waterway it does not control unilaterally is limited. What the proposal does is establish a bargaining position. Tehran has already floated a tolling system for transits, and legislation targeting particular flags sits alongside it as a way of asserting authority over a strait through which its own exports are currently not moving at all. The oil market's response indicates that traders are not treating either idea as rhetorical.
