Oil prices rise on Iran tensions and continued Strait of Hormuz disruption

Oil prices rose in early Asian trading on May 1 as markets continued to price in the risk from Iran tensions and disruption through the Strait of Hormuz.

Reuters-syndicated reporting said Brent crude climbed to about $111.59 a barrel, while U.S. crude was around $105.46. AP also reported prices near those levels, with Brent around $111.07 and U.S. crude around $105.17.

The move followed reports that efforts to resolve the Iran conflict had stalled and that flows through the Strait of Hormuz remained disrupted. The waterway is one of the world’s most important energy chokepoints, so any threat to traffic there can quickly lift crude prices.

The U.S. Energy Information Administration has said the Strait of Hormuz closure and related production outages are key drivers in its oil forecast. In an April 7 release, the agency said its outlook assumed the conflict would not persist past April and that traffic through the strait would gradually resume, but it still expected oil prices to remain elevated.

The International Energy Agency said in an April 14 oil market report that restrictions on tanker movements through Hormuz were driving a major supply shock and the largest disruption in history.

For now, traders appear to be keeping a higher risk premium in place until there is clearer progress on Iran talks or a material improvement in shipping conditions.