Although the truce technically remains in place, markets have already returned to pre-truce dynamics, reflected in a sharp rise in oil prices. Notably, prices fell by 15% in a single day after the ceasefire was announced.
Crude Oil Price on April 13
Brent crude futures rose $6.71, or 7.05%, to $101.91 a barrel by 0104 GMT, reversing a 0.75% decline seen on Friday. US West Texas Intermediate rose sharply by $7.59, or 7.86%, to $104.16 a barrel after falling 1.33% in the previous session.
US President Donald Trump said on Sunday that the navy would begin a blockade of the strait, raising tensions after marathon talks with Iran failed to produce a deal. The breakdown threatens a fragile two-week ceasefire. Trump also acknowledged that oil and gasoline prices could rise during the November midterm elections.
US Central Command said the blockade would take effect at 10 a.m. ET (1400 GMT) on Monday. It states that all maritime traffic entering or leaving Iranian ports will be subject to enforcement, regardless of nationality. It includes vessels operating in the Arabian Gulf and Gulf of Oman. However, ships transiting the Strait of Hormuz bound for non-Iranian ports will not be affected.
Iran’s Revolutionary Guards responded by warning that any military vessels approaching the strait would be considered a ceasefire violation and would be dealt with harshly.
What’s next for the price?
Brokerage firm Macquarie noted that even if tensions ease, oil prices are likely to remain supported in the $85 to $90 range, moving slowly towards $110 as they pass through the Strait of Hormuz. It added that if disruptions extend into April, Brent could still rise to $150 a barrel.
Looking ahead, crude prices may go higher from current levels. According to Kaynat Chainwala of Kotak Securities, oil could rise to $120 per barrel in the near term and potentially touch $150 if the conflict continues.
Nuwama Institutional Equities echoes the same view. The continued closure of the Strait of Hormuz, which handles about 20 million barrels per day, could push crude prices to $110-150 per barrel.
Market experts believe that crude may enter a structurally higher price phase. Ajit Mishra, senior vice president at Religare Broking, said the current truce is temporary and it could take several months to return to pre-war levels of $70 to $75. In the near term, he expects crude to remain in the range of $80 to $85 on the downside and $95 to $100 on the upside.
Analysts also point out that the outlook for crude remains volatile with an upward bias as long as tensions persist. Continued disruptions in the Middle East, particularly around the Strait of Hormuz, are likely to keep supplies tight, supporting both Brent and WTI prices and maintaining inflationary pressures globally.
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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