Strait of Hormuz crisis worsens as oil spikes and stocks dip

Global markets are on edge once again as rising geopolitical tensions in the Middle East disrupted investor confidence. Stocks slipped from their recent record highs following a new U.S. military strike on Iran and a series of attacks on Kuwait, casting a shadow over hopes for a lasting peace deal in the region.

The renewed friction sent shockwaves through the energy and bond markets. Oil prices surged by as much as 4% before settling slightly, while bond prices tumbled as investors reacted to the sudden escalation, News.Az reports, citing Al Jazeera.

Energy analysts warn that the next few days will be critical for global stability.

"Over the next two weeks, we expect either a deal for a new ceasefire, or the current ceasefire will have collapsed with active hostilities resuming," said Madison Cartwright, a senior geo-economics analyst at Commonwealth Bank Australia.

While Cartwright places a 70% probability on a successful peace agreement, the future of global shipping through the vital Strait of Hormuz remains highly volatile. Maritime insurance for vessels traveling through the strait has become prohibitively expensive, and it remains uncertain how—or at what cost—coverage will be offered moving forward. Additionally, concerns are growing over whether Iran will begin charging a transit toll for ships passing through the corridor.

With shipping traffic through the Strait of Hormuz currently reduced to a trickle, Brent crude jumped 2.7% to trade at $96.80 a barrel.

While crude prices have pulled back from the four-year highs of over $126 witnessed in late April, energy costs remain painfully high for consumers and businesses alike. Oil prices are still 33% higher than pre-war levels and up a staggering 50% compared to this time last year.

News.Az 

By Aysel Mammadzada