Oil holds above $85 as Iran threatens wider export disruption

Oil prices rose for a fourth consecutive trading session on Wednesday as the collapse of the US-Iran ceasefire triggered fresh tensions in the Strait of Hormuz and raised fears that the conflict could spread to other critical energy corridors in the Middle East.

International benchmark Brent crude rose 0.83 percent in early European trading to remain above $85 per barrel, while US benchmark West Texas Intermediate (WTI) gained 0.89 percent to trade above the $80 per barrel mark.

The latest gains extended a rally that has lifted oil prices by about 12 percent since last Friday, as markets price in growing risks to global crude supplies and shipping routes.

The immediate concern remains the Strait of Hormuz, through which almost one-fifth of global oil consumption and a substantial share of global liquefied natural gas exports pass daily.

What had appeared to be a gradual recovery in tanker traffic through the waterway following earlier diplomatic efforts has quickly reversed following the return of hostilities over the weekend.

Shipping movements through the Strait have slowed sharply, with only a handful of tankers continuing to transit the chokepoint after Iran struck commercial vessels in the area and the US launched attacks on Iranian targets before reinstating restrictions on Iranian oil exports.

The situation escalated further on Wednesday after Iran’s Islamic Revolutionary Guard Corps (IRGC) warned that the conflict could spread beyond the Strait of Hormuz.

According to Iranian media reports cited by Reuters, the Guards threatened to shut down “all other export corridors that benefit the US and its allies.”

Read also: Brent curve turns bearish on supply as Hormuz risks mount

“Regional energy exports are either shared by all, or denied to all,” the IRGC said in a statement carried by Iran’s state-owned IRNA news agency.

The warning has increased concerns among traders that disruption could spread to other strategic maritime routes that are critical to global energy supplies.

Particular attention is now turning to the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden and serves as one of the world’s most important shipping corridors for oil and liquefied natural gas cargoes moving between Europe, Asia and the Middle East.

Analysts have warned since the conflict began in February that Iran-aligned Houthi forces in Yemen could become involved in efforts to disrupt shipping through the route.

Reports carried by Iranian media earlier this week suggested that the Houthis were prepared to target the Bab el-Mandeb Strait if Saudi Arabia continued military operations in Yemen.

The strategic importance of the waterway has increased in recent weeks as Saudi Arabia redirected a larger share of crude exports through its Red Sea infrastructure amid growing constraints around Hormuz.

The Bab el-Mandeb corridor provides access to Saudi Arabia’s major crude export terminal at Yanbu, which has become increasingly important as producers seek alternatives to Gulf shipping routes.

The prospect of simultaneous disruptions at both Hormuz and Bab el-Mandeb has introduced a new layer of risk into oil markets because the two waterways together account for a significant proportion of global seaborne energy trade.

The renewed geopolitical premium has also been reflected in the structure of oil futures markets.

This week, the Brent futures curve moved back into backwardation, with prompt contracts trading at a significant premium to longer-dated deliveries, indicating concerns over immediate crude availability rather than future supply.