Oil stays above US$100, Asia stocks tumble as Iran vows to keep Strait of Hormuz closed

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TOKYO – Brent crude inched further above US$100 a barrel, and stocks fell in early Asian trade on March 13, after Iran vowed to attack oil resources in the Middle East and keep choking the Strait of Hormuz.

Having risen above US$100 on March 12, Brent was up 0.2 per cent at US$100.66 at around 8.20am Singapore time, while West Texas Intermediate was flat at US$95.75.

In Japan, the Nikkei was down 1.4 per cent, while South Korea’s Kospi index tumbled 2.2 per cent.

With Gulf states slashing production and oil tankers stuck in the Gulf, benchmark oil prices have risen 40 per cent to 50 per cent since the US and Israel attacked Iran on Feb 28, threatening to curb global economic growth and stoke inflation.

The Strait of Hormuz, a crucial waterway for crude, remains effectively shut.

Saudi forces intercepted dozens of drones on March 13, and Israel came under attack from missiles launched by Tehran.

The International Energy Agency (IEA) has warned that the Middle East war could lead to “the largest supply disruption” in the industry’s history.

In his first public comments since succeeding his father, Iran’s new supreme leader Mojtaba Khamenei said on March 12 that the Islamic republic would seek to ensure the critical waterway for crude and natural gas remains closed.

But US President Donald Trump struck a defiant tone, writing on social media that defeating Iran’s “evil empire” was more important than crude prices.

The IEA warned on March 12 that the supply disruption is the largest in the history of the global oil market, a day after its members agreed to a historic release of emergency reserves to try to cool prices.

In a further effort to tame surging prices, the US granted a temporary waiver for the purchase of Russian oil loaded onto vessels before March 12. The latest measure is broader than a directive earlier in March, when only India was cleared to increase its purchases.

The near-halt to shipping through the narrow Strait of Hormuz near Iran and the Arabian Peninsula has choked off shipments of crude, natural gas and products such as diesel to global customers, driving up energy prices. This has raised fears of an inflation crisis and is beginning to hit some economies.

“This is the most important oil supply disruption event since (the) 1970s,” said Mr Philip Jones-Lux, senior market analyst at Sparta Commodities, referring to previous Middle East supply shocks. The IEA release helps to keep prices from going to “stratospheric levels”, but probably only for a short period, he added.

Iran has likely started laying mines in the strait, according to Britain, which would make shipping even more perilous for those considering passing through the waterway. Since the war began on Feb 28, vessel traffic has slowed to a trickle through the channel, including Iranian tankers carrying oil.

The US Navy could start escorting tankers through Hormuz by the end of the month, US Energy Secretary Chris Wright said on CNBC, while US Treasury Secretary Scott Bessent told Sky News that he believed the navy would be escorting vessels “as soon as it is militarily possible”.

“You cannot clear mines during active combat in a risk-free way, and the navy will not want to enter the strait,” said Mr Aaron Stein, president of the Foreign Policy Research Institute. “The risk is intolerable to international shipping, and the options the US can provide won’t mitigate it.” BLOOMBERG, AFP