Oil costs would skyrocket if Iran moved to cut off the Strait of Hormuz, energy analysts told CNBC on Wednesday.
Raised geopolitical tensions have sparked fears of broadening conflict in the Middle East, with energy market members progressively worried that the fallout could soon disrupt regional crude supplies.
It has pushed the world’s most significant oil chokepoint again into the global spotlight.
Speaking to CNBC’s “Capital Connection” on Wednesday, James Eginton, investment expert at Tribeca Investment Partners, said a move by Iran to close off unrefined supplies in the Strait of Hormuz would send oil costs “through the roof.”
Arranged between Iran and Oman, the Strait of Hormuz is a narrow however deliberately significant waterway that connections crude makers in the Middle East with key markets over the world.
In 2018, the daily oil stream in the channel — which is only 21 miles wide at its narrowest point — averaged at 21 million barrels per day. That is what could be compared to about 21% of global petroleum liquids consumption.
“If you block the Strait of Hormuz, you will send oil through $100,” Eginton said.
“Over the next few days, if we start seeing the Iranians start trying to block the Strait of Hormuz then we should be set for much higher oil prices.”
International benchmark Brent crude traded at $68.87 Wednesday morning, up almost 0.9%, having moved to $71.75 prior in the session — its highest level since September.
U.S. West Texas Intermediate (WTI) crude futures remained at $63.02, around 0.4% higher. WTI had hopped to a session high of $65.65 before the trading day, before shedding the greater part of its benefits.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Rainier Watchdog journalist was involved in the writing and production of this article.