Brent Jumps to $116.72 as Ship Incidents Escalate Near the Strait of Hormuz
Key Facts
Brent crude settled at $116.72 a barrel on October 23, up 3.1% in the session and at its highest level since June 2022, according to the Associated Press. Prices rose as market concerns grew over attacks and supply disruptions, alongside Houthi attacks on Saudi Arabia cited in the report. In the shipping lane, Bloomberg recorded 23 attacks on vessels in or near the Strait of Hormuz during the first two weeks of October. The agency reported that at least 5 ships had reported damage to their engine rooms. The figures highlight the risks to shipping along a vital route for Gulf oil exports, while price movements cannot be attributed to incidents in the strait alone.
Iran said 7 oil tankers caught fire or were damaged in the strait on the night of October 22 after being struck or hitting sea mines, the Associated Press reported. The agency could not independently verify the account. The announcement came as the agency said the United Kingdom Maritime Trade Operations center had not reported Iran's latest claimed attacks, and some shipping companies were reluctant to report incidents. The claims therefore differ from Bloomberg's tally for the earlier period, which counted attacks and engine-room damage. The Associated Press also cited Lloyd's List Intelligence as saying active Gulf operators showed little sign of withdrawing despite 28 attacks on ships in October, the highest number since the start of the war.
Rising risks have fed into the tanker charter market, with spot rates climbing to hundreds of thousands of dollars a day, the Associated Press reported. Transferring oil from one vessel to another takes several days, adding time to a cargo's journey before it completes its route. Some operators, however, continue moving crude through the strait at night, using location systems and phones switched off, according to the agency. Tankers pass through a corridor near Oman's coast under U.S. military protection, before cargoes are transferred to other tankers in the Gulf of Oman bound for Asia. Analysts estimated, in an assessment published by the Associated Press in September, that the route carries about 6 million barrels a day or more, or at least 40% of prewar flows.
Flows remain below prewar levels, according to estimates cited by the Associated Press. The disruption to the strait at the start of the war blocked the passage of about 15 million barrels of oil a day, while about 7 million barrels a day remained absent from prewar flows, according to Rystad's analysis. Saudi Arabia, meanwhile, increased the capacity of its East-West pipeline from 2 million barrels a day to 7 million, Aramco Chief Executive Amin Nasser said. Pipelines and associated transport routes offer partial alternatives to seaborne transit, but they do not eliminate the risks or high shipping costs noted by the agency. The U.S. Central Command chief said more than 3,000 commercial ships had crossed the strait with U.S. military support in the six months before his statement on October 25. Protecting shipping and reopening the route remain central to efforts to ease tensions.
Iran says it is putting forward a proposal to end the war and fully reopen the strait within a week, provided several demands are met, including an end to the U.S. blockade of Iranian ports, according to the Associated Press. The agency reported that U.S. President Donald Trump rejected the proposal in the previous month, while both sides said indirect talks were continuing. A U.N. spokesperson urged that commercial ships not be targeted and called for a return to diplomacy, saying: "We need to see this waterway open, and we need to see tensions de-escalated." These positions place the future of shipping through the strait within the negotiating process, as tankers continue their journeys under protection and at high charter costs. Oil prices, meanwhile, will remain exposed to supply concerns and regional attacks, as described in the Associated Press report on the October 23 close.