Hormuz shipping delays cost $500K daily as Brent tops $90

Brent crude rose $2.21 to $90.31 a barrel Monday after US forces struck two Iranian rocket launchers on Larak Island and Iran retaliated against American bases in Jordan, with shipping through the strait collapsing to about five vessels a day.

"Oil prices will likely stay between $85 and $95 a barrel until there's more clarity on the situation," said Suvro Sarkar, energy analyst at DBS.

The exchange marked the first significant US strike on Iranian territory since late July, ending a lull of more than a month. Jordan's air-defense systems intercepted eight missiles early Monday, while the UAE shot down an Iranian drone over its territorial waters. West Texas Intermediate gained $1.83 to $85.23.

The strait carried roughly one-fifth of global oil flows before the conflict began in February. Each day of congestion compounds costs across freight, war-risk insurance, and energy prices, threatening to push inflation higher and force central banks to delay rate cuts.

The $500,000-a-day figure reflects the compounding cost of vessels idling or rerouting as commercial operators weigh security risks. Visible commodity vessel traffic through the strait fell to about five ships a day over the weekend, according to shipping data, with some operators switching off automatic identification systems. The UK Maritime Trade Operations agency received a delayed report of a tanker struck while traveling inbound through the waterway.

The latest escalation began Sunday when US Central Command said it struck two rocket launchers on Larak Island, near the strait, after identifying Iranian preparations to deploy naval mines. Washington called the activity an "imminent threat" to shipping. Iran's Islamic Revolutionary Guard Corps responded by targeting US military positions in Jordan, where American personnel and assets are stationed. Iranian state broadcaster IRIB reported casualties from the American strike.

Oil Market Reaction

Brent crude gained more than 2 percent on Monday, while WTI climbed above $85. The moves followed last week's 4 percent decline, leaving crude on track for a modest monthly drop in August despite the latest flare-up. DBS's Sarkar expects prices to remain rangebound between $85 and $95 until the situation clarifies.

The US Treasury said new sanctions on Iran are likely to be announced weekly going forward, adding another layer of supply-side pressure. President Donald Trump claimed on social media that Iran's Kharg Island energy hub was "blown to smithereens," though the post contained only an AI-generated video with no evidence of an actual attack.

Inflation and Rate-Cut Calculus

The energy shock arrives as central banks weigh whether to ease monetary policy. Markets now price a 57 percent probability of a September rate increase by the Federal Reserve, according to figures cited in market reports. JPMorgan chief US economist Michael Feroli said the September meeting remained "live," though the bank continued to expect a rate increase in December. Two-year Treasury yields stood at about 4.36 percent after climbing nearly 12 basis points on Friday, while the 30-year yield remained above 5.2 percent.

Asian equities sold off on the escalation. Japan's Nikkei fell 2.1 percent, South Korea's benchmark declined 2.4 percent, and MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.7 percent.

The last time the strait faced sustained disruption was during the 2019 tanker attacks, when Brent spiked above $75 before retreating as supply concerns eased. The current conflict has already proven more persistent, with the waterway effectively closed to normal traffic since February.

If the disruption remains temporary, the inflationary impact could be limited. But a sustained reduction in energy supplies would raise fuel, transport, and production costs across major economies, making it harder for central banks to bring inflation back to target. The coming US payrolls report on Friday and consumer-price data scheduled for September 11 will be closely watched for signs of how the energy shock is transmitting through the economy.

This article is for informational purposes only and does not constitute investment advice.