Global Oil Prices Continue to Surge Due to US-Iran Tensions
Global crude oil prices experienced a significant increase in trading on Tuesday (8/9). This surge was triggered by the re-escalation of tensions between the United States and Iran, raising serious concerns over potential disruptions to oil shipments through the Strait of Hormuz, one of the world’s most crucial maritime routes.
Based on trading data at 06:30 GMT, Brent crude futures soared 1.4 per cent to the level of US$98.5 per barrel. This figure marks the highest level in the last six weeks. A similar trend occurred with West Texas Intermediate (WTI) crude futures, which also rose 1.4 per cent to US$94 per barrel.
The price hike was driven by a series of military incidents in the Gulf region. Houthi groups in Yemen reportedly attacked several cities and economic infrastructure in southern Saudi Arabia on Tuesday. The Saudi Ministry of Energy confirmed fires at several energy facilities due to the attacks, which also reportedly resulted in casualties according to the Saudi-led military coalition.
On the other hand, direct tensions between the US and Iran increased after the Islamic Revolutionary Guard Corps (IRGC) destroyed a US military surveillance aerostat near Erbil Airport, Iraq, using a drone attack on Monday.
The market situation was further exacerbated by a statement from the Secretary of Iran’s Supreme National Security Council, Mohsen Rezaei. He stated that Iran would soon establish a new ‘restricted’ maritime zone outside the Strait of Hormuz. Rezaei warned that any vessel entering that area without permission would be placed on a sanctions list.
In June, the US and Iran had signed a memorandum of understanding mediated by Pakistan and Qatar to end hostilities and reopen the Strait of Hormuz. However, both parties are currently accusing each other of failing to meet commitments, leading to uncertainty in global energy supply and price fluctuations in international markets.
Iranian Foreign Minister Abbas Araghchi emphasised that the US return to the Islamabad MoU could ease regional tensions during talks with Japanese Foreign Minister Toshimitsu Motegi. Meanwhile, the Iran-US conflict has triggered a surge in energy costs in the US by up to US$100 billion, with diesel prices hitting a record US$5.90 per gallon, burdening the average household by US$760.
Iranian President Masoud Pezeshkian stated that Tehran would continue to resist attacks until the aggressor regrets them, amidst tensions with the US in the Strait of Hormuz. Iran also criticised Canada for supporting US operations in the Strait of Hormuz, calling it a form of submission amidst sovereignty threats by Donald Trump.
The US-Iran conflict has permanently altered the global economic map, from the control of the Strait of Hormuz to the shift in oil market power towards China.
In response to these global shifts, Finance Minister Purbaya Yudhi Sadewa ensured that energy subsidies will be maintained to mitigate the impact of surging global oil prices and to safeguard domestic purchasing power. The Deputy Minister of Energy and Mineral Resources, Yuliot, emphasised that non-subsidised fuel prices, such as Pertamax, follow global market prices, which are currently surging towards US$96 per barrel.