Oil prices moved higher on Friday as uncertainty over plans to reopen the Strait of Hormuz continued to unsettle energy markets, with proposed restrictions on shipping through the strategic waterway raising doubts over how quickly normal crude flows can resume, according to a report by Reuters.
Brent crude futures were up 0.97% at $83.29 a barrel by 0303 GMT, while US West Texas Intermediate gained 0.83% to $77.93.
The gains followed a sharp rally on Thursday, when both benchmarks settled more than $3 higher after Iran signalled that any reopening of the Strait could come with conditions affecting which vessels are permitted to transit.
The waterway is critical to global energy markets, with around a fifth of the world’s oil and liquefied natural gas supplies having passed through the Strait before the conflict began at the end of February.
Earlier in the week, oil prices had fallen as markets became more optimistic that an agreement could be reached to restore shipping through the Strait. Brent subsequently climbed back above $80 a barrel on Thursday after briefly falling below that level for the first time since July 13.
Despite Friday’s rebound, both Brent and WTI remained on course for weekly declines of roughly 8%, highlighting the sharp swings in oil markets as traders assess the prospects for a durable resolution.
The latest source of uncertainty is an Iranian proposal that would restrict access to US, Israeli and other vessels deemed hostile, while potentially imposing fees and penalties on ships using the Strait.
An Iranian parliamentary committee is reportedly reviewing draft legislation that could impose fines of as much as 20% of a cargo’s value on vessels breaching the proposed restrictions. Iran is also seeking transit fees equivalent to between 5% and 7% of cargo values, while Oman has reportedly discussed a fee of around 3%. The US position is that ships should not be charged.
The proposals have raised questions among market participants over whether any reopening would represent a genuine return to normal shipping conditions or instead create a tightly controlled transit corridor.
“That’s not the market pricing in a bad deal, it’s pricing in confirmation that whatever emerges is a managed/conditional corridor, not a restoration of normal flow,” said Lin Ye, vice president of commodities market – oil at Rystad Energy.
The practical implementation of any agreement could also prove difficult. Industry sources have pointed to US sanctions and insurance restrictions as potential obstacles to arrangements involving payments to transit the Strait.
The uncertainty has contributed to substantial swings in oil prices this week, leaving investors to reassess the likelihood, timing and terms of a potential reopening.
Additional geopolitical risk came from Yemen, where the Houthi movement said it had launched missile and drone attacks against Saudi deployments in Marib and Hadramout.
US President Donald Trump said on Thursday that he believed the conflict would end soon, but the continuing uncertainty around Hormuz means energy traders remain highly sensitive to developments in the region.
For hedge funds and other macro investors, the conflicting signals leave oil exposed to further sharp moves as positioning adjusts to changes in expectations around supply disruptions, shipping access and the eventual terms of any ceasefire or transit agreement.
