Straits of Hormuz are full of rumors as international oil prices surge towards their largest monthly increase since July 2023.

Due to concerns among commodity traders about the escalating military or political intervention threats by US President Donald Trump against Iran and Cuba, and how any potential hostile actions between the two sides would affect the supply of crude oil and petroleum products in the Middle East and Latin America, traders are increasingly worried about the potential emergency closure of the strategic sea route for global oil and natural gas transportation - the Strait of Hormuz in the Middle East. This could lead to the international benchmark crude oil futures prices of Brent crude experiencing the largest monthly increase since July 2023. The latest data shows that Brent crude broke above $70 per barrel for the first time since July on Thursday and remained above $70 in the early Asian session, but soon after fell along with prices of copper, gold, and silver metals, dropping by less than 1% while hovering below and slightly above $70. At the same time, the US Dollar Index, after declining for several days, rebounded significantly, exerting significant pressure on commodity prices. Meanwhile, the North American oil pricing benchmark - West Texas Intermediate (WTI) crude oil futures prices are approaching $65. President Trump's recent statements have shifted from planning military punishment for Iran due to deadly crackdown on protesters in Tehran, to seeking a new nuclear agreement this week. However, the likelihood of a successful agreement remains very low. Although the market still expects global oil supply to increase from 2026 to 2027, leading to potential downward pressure on international oil prices, the continued threats from the Trump administration against Iran and the increasing political intervention in Latin America are driving a strong start to the year for oil. Traders are entering the options market, with Citigroup Inc. predicting a risk premium of $7 to $10 per barrel for Brent. As shown above, oil is set to experience the strongest rally in months propelled by geopolitical risks from Iran to Venezuela, but there was some pullback on Friday due to market risk aversion sentiment. President Trump urged Iran to engage in nuclear talks, while Tehran warned of retaliatory measures, raising concerns about a renewed escalation of tensions between the US and Iran. Market focus is on how these tensions could affect shipping through the Strait of Hormuz. The strait is a narrow passage between Iran and the Arabian Peninsula crucial for global energy flow, with numerous oil tankers carrying crude oil and liquefied natural gas passing through daily. President Trump's latest round of threats, including those on social media warning of severe military strikes if Tehran does not reach a nuclear agreement, has added weight to the threat. Additionally, a carrier strike group has recently arrived in the Middle East following the deployment of naval assets to the region ordered by Trump. Furthermore, Trump later told reporters in Washington, "We have large, very strong and heavily armed ships heading toward Iran. If we don't have to use them, it would be great." On January 29, Iran's First Vice President mentioned that the government has remained on alert since coming to power and will not initiate war, but will defend itself with resolve if war is initiated, and the outcome of the conflict will not be decided by the enemy. He emphasized that Iran advocates dialogue and rationality, but if conflict erupts, the result will no longer be determined by the opponent. Market concerns are mainly focused on how any escalation between the US and Iran or Iran and Israel will affect shipping through the Strait of Hormuz. The strait separates Iran from the Arabian Peninsula, and numerous oil tankers carrying crude oil and liquefied natural gas pass through the strait daily, transporting goods to various parts of the world. Recent reports indicate that Iran issued warnings to maritime vessels on Thursday, stating that it plans to conduct military exercises on Sunday and Monday, including live ammunition firing near the Strait of Hormuz; the report cited two Pakistani security officials. As of the time of writing, the March Brent crude (expected to settle on Friday) traded almost flat at $70.50 per barrel, while futures for the near month surged by 16% this month. March-delivery WTI dropped slightly by 0.5% to $65.08 per barrel. Commodity traders are also concerned about geopolitical risks in Latin America, particularly in Cuba, as US President Trump signed an executive order on Thursday declaring a national emergency and authorizing the US to impose tariffs on any country deemed to sell or provide oil to Cuba. The order instructs the Commerce Department to identify countries that may provide oil to Cuba, with senior government officials then deciding what additional tariffs should be imposed. "The Cuban government has taken extreme action that harms and threatens the United States," Trump said in the executive order. "The regime has allied with numerous countries hostile to the United States, transnational terrorist organizations, and malicious actors, and provides them with support."