Oil Prices Rise, US Attack on Kharg and Hormuz Closure Disrupt Markets

Strait of Hormuz/PHOTO: MC2 Indra Beaufort via WIkimedia Commons

JAKARTA - The war between Iran and the US and Israel continues to put pressure on the world's energy lifeline. Brent crude prices rose 1.8 percent to US$104.98 per barrel at the start of trading on Monday, after the United States attacked Kharg Island, Iran's main oil export center. The market reacted quickly because what was at stake was not only the escalation of the war, but also global energy supplies.

Launching The Guardian, Monday, March 16, the attack deepened concerns over the disruption of world oil distribution, especially since the Strait of Hormuz has been almost closed since the crisis erupted. This line is very vital. About a fifth of international oil supplies usually pass through there. If the disruption continues, the impact will not stop in the Gulf region, but could spread to energy prices, logistics costs, and the import burden of Asian countries, including Indonesia.

US President Donald Trump claimed his country's attack had "completely destroyed" most of Kharg Island. To NBC News, as quoted by The Guardian, Trump even said the location could be attacked again "a few more times just for fun". The statement actually thickened market anxiety, not easing it.

Kharg Island is an important node in Iran's oil exports. About 90 percent of the country's oil exports usually flow from the island. Trump also urged a number of US allies, such as Britain, France, Japan, and South Korea, as well as China, to help reopen the Strait of Hormuz.

But the response was cold. South Korea only stated that it was considering various measures. Britain is said to be preparing an option to send a mine-sweeping drone. This cautious attitude shows that opening Hormuz is not just about securing shipping, but risks expanding the war.

The Guardian also reported that oil prices had breached US$100 per barrel last week, the highest level since Russia's invasion of Ukraine. In Asia, pressure is starting to be felt, from fuel subsidies in Thailand to rationing in Bangladesh. That's a sign that the war in the Gulf is disrupting the kitchens of many countries.