Strait of Hormuz traffic plunges as US, Iran resume fighting

Brent crude holds steady despite a plunge in traffic in the critical waterway.

Shipping traffic in the Strait of Hormuz has decreased by 20% since the renewed fighting between the US and Iran began. According to data from the Marine Traffic website, no large vessel has crossed the strait via the recommended transit lane in the past 48 hours. This decrease in traffic is expected to impact the global oil supply, with approximately 20% of the world's oil passing through the strait. The US Energy Information Administration reports that the average cost of Brent crude oil has held steady at around $65 per barrel.

The decrease in shipping traffic in the Strait of Hormuz will directly impact the price of gas at the pump. As the global oil supply is disrupted, refineries will have to pay more to secure oil shipments, which will be passed on to consumers in the form of higher gas prices. For example, a 10% increase in the cost of oil can result in a 3-5% increase in gas prices. This increase will be felt by consumers who rely on gas for their daily commutes.

The current standoff in the Strait of Hormuz is part of a larger pattern of escalating tensions between the US and Iran. In 2019, the US withdrew from the Joint Comprehensive Plan of Action, a nuclear deal with Iran, which led to increased tensions in the region. Insiders know that the Strait of Hormuz is a critical chokepoint for global oil supplies, and any disruption to traffic in the area can have significant impacts on the global economy. The US and Iran have a long history of conflict, with the US imposing economic sanctions on Iran in 2018.

The next key date to watch is the upcoming OPEC meeting on March 5, where member countries will discuss potential production cuts to offset the impact of the decreased shipping traffic in the Strait of Hormuz. The meeting will be closely watched by oil markets, as any decision to cut production could further impact global oil supplies. Interestingly, despite the decrease in shipping traffic, some oil tankers are still taking the risk of crossing the strait, with one tanker reportedly earning a premium of $100,000 per day for making the journey.