Oil rises amid concerns over proposals to reopen the Strait of Hormuz

Oil prices continued their rise on Friday amid growing concerns over the Strait of Hormuz, as Iran, in cooperation with Oman, proposed a ban on the passage of ships deemed hostile through the strait and imposed heavy fines on those who violate the proposed rules.

Futures contracts for oil rose by more than $3 per barrel at settlement on Thursday, as Iran considered a bill to ban the passage of American and Israeli ships through the Strait of Hormuz, which had previously handled nearly one-fifth of global oil and liquefied natural gas supplies before the outbreak of war in late February.

Prices had fallen earlier in the week as prospects for a resolution to the ongoing conflict increased, but the benchmark Brent crude breached the $80 mark in the previous session after dipping below that level for the first time since July 13.

Tim Waterer, chief market analyst at KCM Trade, said, “Markets have already seen at least one short-lived arrangement earlier this year, so confidence remains low that a new agreement will fully restore tanker movements to normal.”

The Fars News Agency quoted an Iranian official as saying that a parliamentary committee was reviewing a preliminary bill to ban the entry of American, Israeli, and other ships deemed hostile into the Strait of Hormuz, and to impose fines on violators of the proposed restrictions reaching up to 20% of the cargo’s value.

A senior Iranian official stated that his country seeks to impose fees ranging from 5% to 7% of the value of shipments on ships sailing through the strait.

Four industry sources said the proposed agreement would be difficult to implement due to U.S. sanctions and insurance conditions imposed on any payments.