Oil Prices Flirt With Seven-Week Highs as Iran Plans Hormuz 'Exclusion Zone'

Global oil prices surged to nearly seven-week highs this week, driven by Iran's plans to establish an "exclusion zone" in the Strait of Hormuz, alongside heightened military exchanges between the U.S. and Iran. West Texas Intermediate (WTI) crude for October delivery climbed to $93.03 a barrel on Tuesday, September 8, gaining $1.55 or 1.69%, according to The Star, Xinhua, and DTN. International benchmark Brent crude for November delivery added 92 cents or 0.95% to settle at $97.92 a barrel on the same day, as reported by The Star, Xinhua, and DTN, after briefly nearing $100. Both contracts reached their highest levels since July 23 on Monday, September 7, Morningstar reported.

What is Iran planning for the Strait of Hormuz?

Iran is planning to unveil an "exclusion zone" in the Strait of Hormuz in the coming days, according to Mohsen Rezaei, the new secretary of Iran's Supreme National Security Council, who spoke on Sunday, September 6. Rezaei stated this zone would "begin from the line of the U.S. naval blockade, extend toward the Strait of Hormuz, and from this side continue into the Persian Gulf." He added that ships found in breach would face sanctions. Iran also intends to publish maps for a new shipping corridor through the Strait, with Iran and Oman managing the route. Rezaei further stated that Iran would only ensure the Strait of Hormuz remains open if Washington ceased "sabotage, threats and attacks," as reported by Modern Diplomacy, Cyprus Mail, and The New Arab.

Separately, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned on Sunday, September 6, that the U.S. should understand "before it is too late" that the rules of conflict had changed, promising a "faster, harsher and more painful response" to any aggression. On Monday, September 7, Ghalibaf escalated his warning, threatening U.S. oil and gas companies in the region, noting, "The oil and gas chain here is sprawling, accessible, and exposed. American oil and gas companies across these waters and facilities share that..."

How has the U.S. responded?

The U.S. Central Command (CENTCOM) announced on Saturday, September 5, it had struck three oil tankers, including one near Kharg Island, which is crucial for about 90% of Iran's oil exports. Capt. Tim Hawkins, a Central Command spokesperson, called Iran's claim of hitting an unmanned U.S. military vessel in the Strait of Hormuz on Sunday, September 6, a "total lie." U.S. Defense Secretary Pete Hegseth warned that further Iranian attacks on American ships would lead to the destruction of Iranian oil tankers. U.S. Energy Secretary Chris Wright said on September 6 there would be no reduction in the U.S. naval presence, including operations to enforce a blockade on Iranian oil exports and ensure safe passage for commercial vessels. The White House stated on Monday, September 7, that the Strait of Hormuz remained open and under U.S. control. On Tuesday, September 8, the Trump administration imposed sanctions on additional elements of Iran's aviation industry, targeting over two dozen airlines and cargo providers, with Treasury Secretary Scott Bessent warning against doing business with remaining Iranian airlines.

Is the Strait of Hormuz open or closed?

There are conflicting reports regarding the status of the Strait of Hormuz. Iran's Mohsen Rezaei claimed the Strait was effectively closed, calling U.S. assertions of its openness "completely false." Conversely, the White House stated on Monday, September 7, that the Strait of Hormuz remained open and under U.S. control, a sentiment echoed by U.S. Energy Secretary Chris Wright, who stated oil was getting through the waterway. Shipping data also presents a mixed picture. Kpler, a commodities data firm, reported only 12 ships crossed the Strait on Monday, September 7, a significant drop from the typical 138 vessels. However, US Energy Secretary Chris Wright reportedly stated that 17 million barrels of crude passed through the Strait on August 31, which was the highest volume in recent months.

What does this mean for oil markets?

The escalating tensions in the Strait of Hormuz, a critical maritime route through which one-fifth of global crude supplies flowed before the conflict, have significantly impacted market sentiment. Shipping traffic has sharply declined since the U.S. war with Iran entered its second week, marking over six months of hostilities. The conflict previously unraveled a preliminary ceasefire accord between the U.S. and Iran reached in June.

Analysts are already adjusting price forecasts. ING stated that the continuing stalemate merits revisiting price projections. Goldman Sachs suggested crude could reach $120 per barrel if attacks on Middle Eastern shipping intensify. ANZ Bank's senior commodity strategist, Daniel Hynes, stated the latest escalation "could see Persian Gulf supply remain constrained through the rest of 2026," with a full return to pre-war throughput not expected until late Q1 or early Q2 of 2027. Citi raised its third-quarter 2026 Brent forecast to $86/barrel, viewing the current situation as "unsustainable" without renewed deal-making to reopen the waterway in Q4. These rising energy prices are also posing political challenges for President Trump and the Republican Party ahead of the November midterm elections.

This is educational information, not legal, financial, tax, or investment advice.