Oil prices rose above $100 a barrel on Monday, as the U.S. Navy prepared to block vessels traveling to and from Iran through the Strait of Hormuz, which could limit Iranian oil exports after Washington and Tehran failed to reach a ceasefire agreement, UNN reports with reference to Reuters.
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Brent crude futures rose $6.96, or 7.3%, to $102.16 a barrel by 4:30 GMT (7:30 a.m. Kyiv time) after falling 0.75% on Friday. U.S. West Texas Intermediate crude rose $8.12, or 8.4%, to $104.69 a barrel after falling 1.33% in the previous session.
"The market has largely returned to pre-ceasefire conditions, except that now the U.S. will also block the remaining Iran-related oil shipments of up to 2 million barrels per day passing through the Strait of Hormuz," said Saul Kavonic, head of energy research at MST Mar Mar.
U.S. President Donald Trump said on Sunday that the U.S. Navy would begin a blockade of the Strait of Hormuz, raising the stakes after marathon talks with Iran failed to produce a ceasefire agreement and jeopardized a fragile two-week truce.
US announces full naval blockade of Iranian ports starting April 1313.04.26, 01:33
He added that oil and gasoline prices could remain high until the midterm elections in November, a rare acknowledgment of the potential political consequences of his decision to attack Iran six weeks ago.
"The mere threat of coercive measures has been enough to reprice oil, demonstrating how vulnerable oil is to geopolitical factors," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
"A return to triple-digit prices or a jump in the geopolitical risk premium that briefly disappeared during previous ceasefire reports seems justified," Sachdeva added.
U.S. Central Command said U.S. forces would begin enforcing a blockade of all maritime traffic entering and exiting Iranian ports at 10:00 a.m. ET (5:00 p.m. Kyiv time) on Monday.
The blockade "will be impartially applied to vessels of all nations entering or exiting Iranian ports and coastal areas, including all Iranian ports in the Persian Gulf and the Gulf of Oman," CENTCOM said in a statement.
The statement also said that U.S. forces would not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports.
IG market analyst Tony Sycamore said the move would effectively cut off Iranian oil supplies, forcing Tehran's allies and customers to apply the necessary pressure to reopen the waterway.
On Sunday, Iran's Islamic Revolutionary Guard Corps said that any military vessels attempting to approach the Strait of Hormuz would be considered a violation of the two-week ceasefire agreement with the U.S., and such attempts would be met with harsh and decisive action.
Despite the stalemate, three supertankers fully loaded with oil passed through the Strait of Hormuz on Saturday, shipping data showed. These were apparently the first vessels to leave the Persian Gulf since the ceasefire agreement was reached last week.
According to LSEG, oil tankers are avoiding the Strait of Hormuz ahead of the U.S. blockade of Iran.
On Sunday, Saudi Arabia announced the restoration of full pumping capacity of the East-West pipeline to approximately 7 million barrels per day, days after assessing the damage to its energy sector from attacks during the conflict with Iran.