Global oil prices have climbed above $90 a barrel after a cargo ship was hit by a projectile in the Strait of Hormuz, raising fears that an escalating conflict involving Iran could cause prolonged disruption to one of the world's most vital energy shipping routes.
International benchmark Brent crude rose sharply to nearly $92.34 a barrel, recovering earlier losses and adding to the dramatic volatility seen in energy markets over the past 48 hours. The latest surge came after the United Kingdom Maritime Trade Operations (UKMTO) reported that a commercial cargo ship had been hit by an unidentified projectile in the Strait of Hormuz, causing a fire on board.
The incident is the latest in a series of attacks targeting ships in the Gulf region, underscoring the growing risks to global oil and gas supply chains as the Middle East conflict intensifies.
Shipping through the Strait of Hormuz, a narrow waterway between Iran and the United Arab Emirates that normally carries about a fifth of the world's oil exports, has almost completely halted as commercial operators consider the risks of operating in the area.
Peter Aylott, policy director at the UK Chamber of Shipping, said attacks on ships were becoming indiscriminate and widespread across the region, including incidents near Kuwait and in the western Persian Gulf.
He warned that the threat of further attacks had effectively disrupted maritime traffic.
“Shipping passing through the strait has dropped from about 100 ships per day to less than five, and most of those appear to be Iranian ships,” Aylott said.
The situation has left around 1,000 commercial vessels stranded in the Gulf, including an estimated 80 to 90 vessels of UK interest, as shipping companies refuse to take the risk of carrying cargo through the increasingly dangerous corridor.
Two additional ships, a bulk carrier and a container ship, were also reportedly attacked within the past 24 hours, raising concerns that the disruption could deepen if hostilities continue.
Energy markets have experienced extraordinary volatility as traders try to predict how long the conflict will last and whether the Strait of Hormuz will reopen to normal shipping.
Brent crude rose to more than $118 a barrel earlier this week, its highest level since 2022, before falling to near $80 a barrel amid reports that governments were considering releasing emergency oil reserves.
The benchmark bounced back strongly after the latest shipping attack, reflecting continued uncertainty about supply.
Brent slipped to $88 a barrel at one point during Asian trading after the Wall Street Journal reported that the International Energy Agency (IEA) was considering the largest coordinated release of oil reserves in its history.
Such a move would surpass the 182 million barrels released following Russia's invasion of Ukraine in 2022.
However, the attack in the Strait of Hormuz shifted market sentiment sharply towards supply concerns, causing prices to climb again.
Overall, Brent crude is now up more than 40 percent since the start of the year, driven by rising geopolitical tensions and concerns over disruptions to global energy flows.
Further uncertainty has emerged over whether military escort can be used to secure shipping routes through the Strait of Hormuz.
US Energy Secretary Chris Wright briefly posted on social media that the US Navy had escorted an oil tanker through the strait to ensure energy supplies continued.
The post was immediately removed, and US officials clarified that US forces are not currently escorting commercial vessels through the waterway.
This confusion has increased investor uncertainty about the security of global energy shipments and the outlook going forward.
Without clear military protection or diplomatic success, shipping companies are expected to be cautious about returning to the route.
European stock markets fell on a fresh surge in oil prices as investors worried about the economic impact of higher energy costs.
In London, the FTSE 100 fell 1 percent to 10,301, reversing the previous day's gains. Shares also fell in major European markets, including Germany and France, while Asian shares posted modest gains overnight.
Higher oil prices are widely expected to increase inflation around the world, potentially forcing central banks to keep interest rates higher for longer.
European leaders have warned that the conflict is already driving up energy import costs across the continent.
European Commission President Ursula von der Leyen said the disruption had already cost the EU about €3 billion in excess energy imports.
“Gas prices have increased by 50 percent and oil prices have increased by 27 percent,” he told EU lawmakers in Strasbourg.
“This is the price of our dependence.”
Despite rising prices, von der Leyen rejected calls for the EU to return to Russian energy purchases – imports that were largely halted after Russia's full-scale invasion of Ukraine in 2022.
Energy traders say the main question now facing the market is how long the Strait of Hormuz will remain effectively closed.
If tanker traffic remains severely restricted, analysts have warned that oil prices could rise even higher in the coming weeks, potentially surpassing previous crisis levels.
The Strait of Hormuz crisis has already been compared to previous global energy shocks, and economists have warned that a prolonged disruption could slow global economic growth while inflationary pressures could rise again.
At the moment, the market is torn between expectations that emergency supplies will be released and the real risk that the world's most important oil shipping route could remain unusable for a long time.
jamie young
Jamie is a senior reporter at Business Matters, with over a decade of experience in UK SME business reporting. Jamie has a degree in Business Administration and regularly attends industry conferences and workshops. When not reporting on the latest business developments, Jamie is passionate about mentoring emerging journalists and entrepreneurs to inspire the next generation of business leaders.