Oil prices moved higher on Friday as uncertainty surrounding the future of shipping through the Strait of Hormuz continued to support the market. Fresh proposals from Iran, developed alongside Oman, have raised concerns by suggesting restrictions on vessels considered hostile and financial penalties for ships that fail to comply with the proposed transit rules.
By 06:34 GMT, Brent crude futures had climbed 85 cents, or 1.03%, to $83.34 a barrel, while US West Texas Intermediate crude gained 52 cents, or 0.67%, to $77.81 a barrel.
Iran’s Proposal Revives Supply Concerns
Oil prices had already surged by more than $3 per barrel on Thursday after reports that Iran was considering legislation to prohibit US and Israeli vessels from using the Strait of Hormuz. Before the conflict that began at the end of February, around one-fifth of global oil and liquefied natural gas shipments passed through the strategic waterway.
Earlier in the week, oil prices had retreated as hopes grew that negotiations could ease regional tensions. However, Brent crude recovered above the $80 mark on Thursday after briefly falling below that level for the first time since 13 July. Despite the rebound, both global benchmarks remain on course for weekly losses of around 8%.
Market Watches Iran’s Draft Transit Rules
Analysts believe this week’s developments indicate that tensions between Iran and the United States remain unresolved.
According to Iran’s Fars news agency, a parliamentary committee is reviewing draft legislation that would prevent US, Israeli and other vessels classified as hostile from transiting the Strait of Hormuz. The proposal would also impose fines of up to 20% of a cargo’s value on ships that breach the new rules.
Lin Ye, Vice President of Commodities Markets – Oil at Rystad Energy, said the market is responding directly to Iran’s proposed framework for shipping through the strait.
“That’s not the market pricing in a bad deal, it’s pricing in confirmation that whatever emerges is a managed/conditional corridor, not a restoration of normal flow,” Ye added.
According to a senior Iranian official, Tehran is seeking transit fees of between 5% and 7% of cargo values for vessels using the waterway. Oman is discussing a lower fee of around 3%, while the United States continues to oppose any charges.
Industry sources have suggested that such an agreement would be difficult to implement because of existing US sanctions and insurance restrictions related to payments.
Markets Await Greater Clarity
Vandana Hari, founder of Vanda Insights, said the latest headlines have created significant volatility in oil markets but noted that traders still lack clarity over the conditions required for a final agreement.
Meanwhile, Yemen’s Houthi movement claimed responsibility for missile and drone strikes targeting “Saudi deployments” in the Marib and Hadramout regions on Thursday.
US President Donald Trump said he believed the conflict would come to an end “soon”, although markets continue to price in geopolitical risks affecting global energy supplies.