US military reportedly strikes tankers near Strait of Hormuz
- Explosions are reported near the Strait of Hormuz in southern Iran.
- Fox News reports that the US military struck several tankers accused of trying to break a blockade.
- Markets are now monitoring the risk of a broader military escalation in the region.
Geopolitical tensions intensified on Friday after reports from US and Iranian media regarding military operations around the Strait of Hormuz. According to a Fox News reporter on X, the US military carried out new airstrikes targeting several empty tankers attempting to break a blockade in the region.
At the same time, Iran’s Mehr news agency reported that an explosion was heard in the port city of Sirik, located near the Strait of Hormuz, although no official explanation has been provided so far.
Investors remain focused on potential official statements from Washington or Tehran to assess the risk of a wider escalation in the region.
Market reaction
West Texas Intermediate (WTI) Crude Oil remains under pressure, falling 2.83% on Friday, trading at $91.90 at the time of writing.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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