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Business Insider
10 hours ago
- Business
- Business Insider
Why all eyes are on the Strait of Hormuz, a 90-mile strip critical to global oil prices
Global investors are on alert about a 90-mile sea passage in the Middle East, fearing that any block of the Strait of Hormuz could derail global shipping and oil. Tensions in the Middle East escalated sharply after the US struck Iran's nuclear facilities on Sunday, prompting fears of retaliation from Tehran. Beyond concerns about defense and security, markets are concerned about the fallout for oil prices and the global economy should Iran block shipping in the Strait of Hormuz — a threat Tehran has repeated for years. "If Iran chooses to blockade the Strait of Hormuz, it'd be categorically negative," Kyle Rodda, a senior financial markets analyst at told Business Insider. "In the worst-case scenario, it would be incredibly impactful: higher fuel prices, higher inflation, slower growth, and interest rates higher than where they'd otherwise be," Rodda said. What is the Strait of Hormuz? One of the most geopolitically sensitive maritime routes, the Strait of Hormuz is just 21 miles across at its narrowest point. It connects the Persian Gulf to the Indian Ocean, with Iran to its north and the United Arab Emirates and Oman to its south. According to the US's Energy Information Administration, the Hormuz is one of the world's busiest shipping lanes, carrying about 20 million barrels of oil a day. Most energy shipments through the Strait of Hormuz have no other means of exiting the Persian Gulf, the starting sea point for major oil producers like Saudi Arabia to export their energy to the rest of the world. How much shipping goes through the Strait of Hormuz? About a quarter of seaborne oil and a fifth of global liquified natural gas trade moves through the Hormuz, so any disruption to shipping would hit the energy markets hard. "The bombing of Iranian nuclear facilities by the US over the weekend increased supply risks significantly for the oil and LNG market," wrote Warren Patterson, the head of commodities strategy at ING, on Monday. Can Iran really close the Strait? Iran doesn't have the legal authority to shut down marine traffic in the Hormuz. But it could disrupt the movement of vessels by other means, for example by damaging oil and shipping infrastructure. On Sunday, the Iranian parliament voted to close the Strait of Hormuz in retaliation against the US's action. The final decision still lies with the country's top security officials, according to Iran's state-owned Press TV. Analysts said they think an Iranian blockade is probably more about political posturing than real action. "While the headlines sound dramatic, the reality is that Iran's parliament holds no executive power over military or strategic decisions, particularly not ones with such far-reaching geopolitical and economic consequences," Dilin Wu, a research strategist at Pepperstone, told BI. "Iran is well aware that any direct disruption to global oil flows through the Strait would likely trigger a significant military and economic response, possibly escalating the conflict beyond its control," she added. Would the US be affected by a blockade? The US is an energy giant and has become a net energy exporter since 2019, so it's less prone to physical supply shock from a blockade of the Hormuz. However, the US could still be hit by the fallout from worsening global economic conditions. "Any negative impact would be through deteriorating financial conditions or through higher for longer rates as the Fed has another reason to delay cuts," Deutsche Bank analysts said in a Monday note. What about other countries? Asian countries would be the most affected by a blockade of the Hormuz, said Priyanka Sachdeva, a senior analyst at brokerage Phillip Nova. In 2024, over 80% of crude oil, condensates, and LNG that moved through the Hormuz headed to Asia, according to the EIA. "Asia, which consumes the lion's share of Middle Eastern oil, would be most vulnerable, with India, Japan, South Korea, and China facing logistical uncertainties and costlier re-routing," said Sachdeva. South European countries dependent on Gulf oil could also face higher import costs, although Saudi Arabia and the UAE can reroute significant volumes of such exports via pipelines and via a pipeline and the UAE port of Fujairah. What would a closure mean for gas prices and inflation? Energy is a key input cost, so any gains in oil prices are likely to drive up inflation broadly. The US's strike on Iran sent oil futures up to a five-month high late on Sunday. Oil prices are now up about 10% since Israel's strikes on Iran in June. These developments are taking place amid the summer driving season, when US gas demand peaks. Should the gains in oil prices be sustained, pump prices are likely to rise in the weeks ahead. According to the EIA, the price of gas typically rises by 2.4 cents per gallon when crude oil prices rise by $1. This translates into a gain of about 20 cents per gallon at current levels for oil futures.
Herald Sun
18 hours ago
- Business
- Herald Sun
US strikes on Iran spook ASX as crude oil price soars
Don't miss out on the headlines from Business Breaking News. Followed categories will be added to My News. Oil prices have surged as the rest of the market wobbled on Monday morning, with the ASX 200 suffering a 'very nervous start' to the trading week. The ASX 200 fell 44.30 points or 0.52 per cent to 8461.20 on the opening bells as investors weighed up the risks in the Middle East. The Aussie dollar also slumped, falling from US64.94 cents to US64.48 as the tension escalates. Investors are worried about two major potential escalations in the conflict, with either the closure of the Strait of Hormuz or an all-out regional war negatively impacting the price of oil. Cutting off the Strait of Hormuz could send the price of oil above $US100 a barrel, as the 32km mile stretch is the primary route of exports from Saudi Arabia, Iraq, the UAE, and Kuwait. Nervous investors are selling down the ASX on fears of Iran-Israel conflict. Picture NewsWire/ Gaye Gerard. senior financial market analyst Kyle Rodda said traders would be looking to gauge risks of energy shocks and the potential impact of the broader conflict. 'The markets are confronting a very nervous start to the week where the only thing that will matter is the fallout from the US missile strike on Iranian nuclear assets over the weekend,' Mr Rodda said. 'There's already some talk of (closing the Strait of Hormuz) from the Iranians, with the instability in the region and risks to critical infrastructure alone enough to worry energy markets.' US Secretary of State Marco Rubio said closing the crucial Strait of Hormuz would be a 'suicidal' move to the Iranian regime. Mr Rubio said closing the strait would affect the US, but it would have 'a lot more impact on the rest of the world', particularly on China. 'That would be a suicidal move on (Iran's) part because I think the whole world would come against them if they did that,' Mr Rubio said. On Saturday (Sunday AEST), US forces confirmed strikes on three Iranian nuclear facilities in the latest flair up between Israel and Iran. US President Donald Trump said the three nuclear sites in Iran – Fordow, Isfahan and Natanz – were 'completely obliterated' but this is yet to be independently verified. The ASX has fallen on Iran-Israel tensions. Picture NewsWire/ Gaye Gerard. The armed conflict sent the price of Brent crude oil surging to above $US80 a barrel after it was about $US65 a barrel. Mr Rodda said the first move by markets would be a possible kneejerk, with traders taking a shoot-first-ask-questions-later approach. 'But as the dust settles and more of the facts become known – especially the extent of the damage achieved by the US – the markets will turn to gaming out the likely course of events from here and quantifying the risks to asset prices,' he said. Originally published as ASX falls on 'very nervous start' to Monday's trading after US strikes Iran
Mercury
18 hours ago
- Business
- Mercury
US strikes on Iran spook ASX as crude oil price soars
Don't miss out on the headlines from Business Breaking News. Followed categories will be added to My News. Oil prices have surged as the rest of the market wobbled on Monday morning, with the ASX 200 suffering a 'very nervous start' to the trading week. The ASX 200 fell 44.30 points or 0.52 per cent to 8461.20 on the opening bells as investors weighed up the risks in the Middle East. The Aussie dollar also slumped, falling from US64.94 cents to US64.48 as the tension escalates. Investors are worried about two major potential escalations in the conflict, with either the closure of the Strait of Hormuz or an all-out regional war negatively impacting the price of oil. Cutting off the Strait of Hormuz could send the price of oil above $US100 a barrel, as the 32km mile stretch is the primary route of exports from Saudi Arabia, Iraq, the UAE, and Kuwait. Nervous investors are selling down the ASX on fears of Iran-Israel conflict. Picture NewsWire/ Gaye Gerard. senior financial market analyst Kyle Rodda said traders would be looking to gauge risks of energy shocks and the potential impact of the broader conflict. 'The markets are confronting a very nervous start to the week where the only thing that will matter is the fallout from the US missile strike on Iranian nuclear assets over the weekend,' Mr Rodda said. 'There's already some talk of (closing the Strait of Hormuz) from the Iranians, with the instability in the region and risks to critical infrastructure alone enough to worry energy markets.' US Secretary of State Marco Rubio said closing the crucial Strait of Hormuz would be a 'suicidal' move to the Iranian regime. Mr Rubio said closing the strait would affect the US, but it would have 'a lot more impact on the rest of the world', particularly on China. 'That would be a suicidal move on (Iran's) part because I think the whole world would come against them if they did that,' Mr Rubio said. On Saturday (Sunday AEST), US forces confirmed strikes on three Iranian nuclear facilities in the latest flair up between Israel and Iran. US President Donald Trump said the three nuclear sites in Iran – Fordow, Isfahan and Natanz – were 'completely obliterated' but this is yet to be independently verified. The ASX has fallen on Iran-Israel tensions. Picture NewsWire/ Gaye Gerard. The armed conflict sent the price of Brent crude oil surging to above $US80 a barrel after it was about $US65 a barrel. Mr Rodda said the first move by markets would be a possible kneejerk, with traders taking a shoot-first-ask-questions-later approach. 'But as the dust settles and more of the facts become known – especially the extent of the damage achieved by the US – the markets will turn to gaming out the likely course of events from here and quantifying the risks to asset prices,' he said. Originally published as ASX falls on 'very nervous start' to Monday's trading after US strikes Iran
Perth Now
19 hours ago
- Business
- Perth Now
‘Nervous': Trump strikes spook ASX
Oil prices have surged as the rest of the market wobbled on Monday morning, with the ASX 200 suffering a 'very nervous start' to the trading week. The ASX 200 fell 44.30 points or 0.52 per cent to 8,461.20 on the opening bells, as investors weighed up the risks in the Middle East. The Aussie dollar also slumped, falling from US64.94 cents to US64.48 as the tension escalates. On Saturday (Sunday AEST), US forces confirmed strikes on three Iranian nuclear facilities in the latest flair up between Israel and Iran. US President Donald Trump said the three nuclear sites in Iran – Fordow, Isfahan and Natanz were 'completely obliterated' but this is yet to be independently verified. ASX falls on Iran- Israel tensions. Picture Newswire/ Gaye Gerard. Credit: News Corp Australia The armed conflict sent the price of Brent crude oil surging to above $US80 a barrel, after sitting around $US65 in the two weeks prior to the start of the most recent conflict in the region. senior financial market analyst Kyle Rodda said traders will be looking to gauge risks of energy shocks and the potential impact of the broader conflict. 'The markets are confronting a very nervous start to the week where the only thing that will matter is the fallout from the US missile strike on Iranian nuclear assets over the weekend,' Mr Rodda said. 'The first moves will be reactive, possibly kneejerk, and out of fear: a typical shoot first and ask questions later approach. 'But as the dust settles and more of the facts become known – especially the extent of the damage achieved by the US – the markets will turn to gaming out the likely course of events from here and quantifying the risks to asset prices.' Mr Rodda said there are two critical parts for the markets, being a regional war or if Iran retaliates to US strikes by cutting off the Strait of Hormuz, an important 20 mile stretch which is the primary route of exports like Saudi Arabia, Iraq, the UAE, and Kuwait. 'There's already some talk of the latter from the Iranianans, with the instability in the region and risks to critical infrastructure alone enough to worry energy markets,' he said. US secretary of state Marco Rubio said closing the crucial Strait of Hormuz would be a 'suicidal' move to the Iranian regime. Mr Rubio said closing the strait would affect the US, but it would have 'a lot more impact on the rest of the world,' particularly on China. 'That would be a suicidal move on [Iran's] part, because I think the whole world would come against them if they did that,' Mr Rubio said.
West Australian
22-05-2025
- Business
- West Australian
Market wrap: ASX falls as Wall Street reacts to spending concerns
Australia's sharemarket slipped on Thursday after a strong recent run, as concerns over US fiscal policy rattled investors. The benchmark S&P/ASX 200 dropped 38.10 points, or 0.45 per cent, to 8,348.70, giving back some of the gains that had lifted the index to a fresh 50-day high earlier in the week. The broader All Ordinaries index remains 3.09 per cent off its 52-week high, though it is still up 0.62 per cent over the past five days. Ten of the 11 sectors ended the day in the red, with materials the only one to go up, rising 0.60 per cent. Financials shed 1.06 per cent, while healthcare and real estate posted losses of 0.32 per cent and 0.78 per cent, respectively. Buy-now-pay-later firm Zip Co posted one of the day's biggest losses, which slid 6.50 per cent to $1.87 followed by Nufarm Limited, tumbling 6.41 per cent to $2.63. Other notable declines included Paladin Energy (down 4.92 per cent), Healius (down 4.33 per cent), and Polynovo, which fell 4.03 per cent. Three of the major banks finished lower, with Commonwealth Bank the weakest performer, down 1.29 per cent to $172.72. NAB slipped 0.72 per cent to $37.37, Westpac lost 0.67 per cent to $31.36, and ANZ was unchanged at $28.85. The Australian dollar edged higher to US 64c. Strong performers included Spartan Resources (up 5.29 per cent) and West African Resources (up 5.22 per cent). According to senior financial market analyst Kyle Rodda, the sharp market movement may be linked to ongoing debates in Congress over the proposed US tax bill. He said the ASX mirrored overnight weakness on Wall Street, which has also been responding to the same concerns. 'The reason for that is that the markets are concerned that all this extra spending is going to be quite inflationary and lead to much higher interest rates,' Mr Rodda said. 'A lot of this is narrative driven – trade narrative.' According to Mr Rodda, investors may now be pricing in the possible consequences of the proposed tax legislation. He said momentum had already started to slow over the past few days as recent trade deals began to cool investor enthusiasm, and the tax bill has now shifted the market's tone toward 'greater caution.' Despite the dip, gold stocks were one of the few strong performers, lifted by rising gold prices as cautious investors looked for safer options. Among the top performers were Lynas Rare Earths, up 6.97 per cent, Genesis Minerals, which added 5.78 per cent, and Northern Star Resources, up 5.36 per cent, alongside strong gains across several gold and resource stocks. 'Gold is one of the shining lights at the moment just on the basis that gold prices are moving back into those record highs,' Mr Rodda said. He noted that US trade policy had influenced the precious metal's rise, with some investors now viewing gold as a 'safe haven'.
