Middle East war still convulses oil market after five months

The Strait of Hormuz, a vital chokepoint for global oil transport, continues to be a major driver of volatility in oil markets, even after more than five months of conflict between the US and Iran. The "shock" of Iran's ability to largely close the waterway has caught markets off guard, according to Jim Burkhard, head of global energy crude oil research at S&P Global.

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What really shakes the market are surprises… and the Hormuz closure was a shock.

Bob McNally, president of the Rapidian Energy Group and a former White House energy advisor, described the unprecedented curtailment of the Strait as a surprise. He noted a perception that the US would not allow such a disruption to occur. With approximately 20 million barrels of crude traversing the Strait daily, McNally called the current supply shock "the biggest disruption in history."

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What really shakes the market are surprises… and the Hormuz closure was a shock.

Despite the overall impact on prices, international benchmark Brent oil has averaged $94 a barrel since the conflict began, falling short of the $150-per-barrel predictions some experts made. This is partly attributed to President Trump's often contradictory statements, which have frequently suggested a resolution to the Hormuz crisis is near. These pronouncements have helped temper crude price increases.

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What really shakes the market are surprises… and the Hormuz closure was a shock.

McNally observed that the market "believes and still believes that this crisis can and will end soon." Optimistic statements from the president and other administration figures have often led to sharp price drops, creating risks for traders. "The oil market has sort of burned the bulls so many times you just don’t have bulls willing to go in and trade," he said, suggesting that only those accustomed to high-risk trading remain active.

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What really shakes the market are surprises… and the Hormuz closure was a shock.