Warnings from Iran that it will try to close the vital Strait of Hormuz in response to further Western sanctions sent oil prices markedly higher on Tuesday.
New York’s main contract, light sweet crude for February delivery rose US$1.66 from Friday’s close to reach US$101.34 a barrel.
In London, Brent fetched US$109.27, up US$1.31.
US and London markets had been closed Monday for the Christmas holiday, and trade was light on Tuesday.
But traders got a jolt from reports that Iran will allow no oil to pass through the key oil transit strait if the West applies sanctions on Iran’s oil exports.
The threat from Iranian Vice President Mohammad Reza Rahimi was reported by the state news agency IRNA as Iran conducted navy war games at the entrance of the oil-rich Gulf.
“If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz,” Rahimi was quoted as saying.
“We have no desire for hostilities or violence…but the West doesn’t want to go back on its plan” to impose sanctions, he said.
Traders said that caused prices to spike.
“Iran is taking a much stronger line that is pushing prices,” said Jason Schenker of Prestige Economics.
“Closing the Strait of Hormuz would not only impact Iranian supply but supply from many different OPEC members.”
The United States maintains a navy presence in the Gulf in large part to ensure that passage remains free.