Oil prices settled sharply higher on Thursday after reports that an Iranian parliamentary committee was reviewing a bill that could ban U.S., Israeli and other vessels considered hostile from passing through the Strait of Hormuz.
Brent crude futures rose $3.04, or 3.83%, to settle at $82.49 per barrel. U.S. West Texas Intermediate crude gained $2.07, or 2.75%, to close at $77.29.
The proposed legislation would allow Iran to restrict certain ships from using one of the world’s most important energy corridors and impose fines of up to 20% of the value of their cargo.
The report renewed concerns about the security of oil and liquefied natural gas shipments at a time when exports from Gulf countries remain far below pre-war levels and tensions are also rising around Red Sea routes.
Iran Reviews Preliminary Hormuz Restrictions
An Iranian lawmaker said a parliamentary committee was examining a preliminary bill covering the Strait of Hormuz.
The proposal would reportedly target U.S., Israeli and other vessels classified as hostile.
Ships violating the restrictions could face fines of as much as one-fifth of the value of their cargo.
The measure remains under review and has not been adopted as law.
Even so, the possibility of restrictions was enough to increase the geopolitical risk premium in oil prices because of the strait’s importance to global energy trade.
Why the Strait of Hormuz Matters
Before the Iran conflict began in late February, approximately one-fifth of the world’s daily oil and liquefied natural gas supplies passed through the Strait of Hormuz.
The narrow passage connects major Gulf producers with international markets.
Any restriction, military confrontation or shipping disruption in the area could reduce export flows or make transportation more expensive.
Even when physical supply continues, the threat of disruption can lift oil prices because traders account for the possibility of delays, higher insurance costs and reduced availability.
The proposed bill therefore carries significance beyond the vessels directly named in the restrictions.
Delays in U.S.-Iran Talks Support the Risk Premium
Oil traders remain focused on the progress of negotiations between the United States and Iran.
Dennis Kissler, senior vice president of trading at BOK Financial, said longer delays in reaching agreements would increase the likelihood of prices moving higher again.
The market had previously responded to signs that diplomatic progress could reduce tensions.
The latest report reversed part of that optimism by showing that Iran was still considering measures capable of restricting a major shipping route.
As long as the negotiations remain unresolved, oil prices may continue reacting quickly to each political or military development.
Houthi Attacks Add Another Source of Concern
Tensions also increased in Yemen.
The Iran-aligned Houthis said they had carried out missile and drone attacks on what they described as Saudi deployments in Marib and Hadramout.
The group claimed that the attacks killed or injured hundreds of Saudi-aligned fighters and destroyed military camps, weapons depots and vehicles.
Those claims were not independently confirmed in the source.
The attacks matter to energy markets because they represent increased activity in another regional theatre beyond the Persian Gulf.
They also remind traders that Red Sea shipping routes may remain vulnerable.
Red Sea Supply Routes Remain Exposed
John Kilduff, a partner at Again Capital, said the attacks showed that the market was moving with changes in regional tensions.
He described the latest activity as a significant development because it occurred away from the Persian Gulf and highlighted the continued risks to Red Sea passageways.
The Red Sea and Gulf of Aden are important for shipping between the Middle East, Asia and Europe.
Attacks in the area can force vessels to reroute, delay deliveries and increase operating costs.
These risks can support crude prices even when actual oil production remains unchanged.
Tanker Attacks Renew Supply Fears
The Houthis said on Wednesday that they had launched missile attacks on two Saudi oil tankers.
One alleged attack took place off the coast of Yanbu, a Saudi Red Sea port city, while the other reportedly targeted a tanker in the nearby Gulf of Aden.
Saudi Arabia had not confirmed either incident at the time of the report.
Roberto Cominotto, equity research analyst at Julius Baer, said Houthi attacks had not yet significantly disrupted oil and gas supplies.
He warned, however, that this could change if the attacks escalated.
The distinction is important. Current physical supply may remain available, but the growing frequency of threats can still push prices higher.
Gulf Exports Remain Below Pre-War Levels
Shipping data showed that crude oil and condensate exports from Gulf countries were broadly stable in July.
However, they remained approximately 40% below pre-war levels.
That decline leaves the market more sensitive to further disruptions.
When export volumes are already reduced, any additional loss of supply can have a greater effect on prices.
The continued weakness also shows that the region has not returned to normal energy flows despite periods of easing tension.
This underlying supply limitation strengthened the market’s reaction to the Iranian bill and Houthi attacks.
Iran Warns Gulf States Over Possible U.S. Strikes
Iran has also warned Gulf countries that any new U.S. attack on Iranian territory could lead to strikes against critical energy infrastructure across the region.
The warning was reported by five sources.
Tehran appears to be trying to increase the potential cost of military action by threatening the regional allies closest to Washington.
Such threats increase the risks facing oil fields, export terminals, pipelines and processing facilities.
The market does not need an attack to occur before pricing in some of that danger.
The possibility alone can support crude prices when regional tensions are already elevated.
Saudi Arabia Lowers Arab Light Price for Asia
Saudi Arabia slightly reduced the official selling price of its Arab Light crude for Asian buyers in September.
The adjustment was shown in a pricing document reviewed by Reuters.
A lower official selling price can reflect competitive market conditions, regional demand considerations or changes in crude differentials.
The move would normally create some downward pressure on market sentiment.
However, it was outweighed during Thursday’s session by the stronger geopolitical concerns surrounding Hormuz, Yemen and regional infrastructure.
Russian Refinery Fire Adds to Global Supply Risks
A major oil refinery in Russia’s Yaroslavl region caught fire after a large Ukrainian drone attack.
Regional governor Mikhail Evrayev said emergency services were working to extinguish the blaze.
The source did not provide the extent of the damage or indicate how much refining capacity had been affected.
The incident adds another potential source of disruption to global fuel markets.
Although the main driver of Thursday’s oil rally was the Middle East, refinery damage in Russia reinforced the wider perception that energy infrastructure remains exposed to conflict.
Brent Outperforms WTI
Brent gained 3.83%, compared with a 2.75% rise for WTI.
Brent is more directly connected to global seaborne oil flows and is therefore often more sensitive to disruptions affecting international shipping routes.
The larger move reflects the market’s concern about the Strait of Hormuz and Red Sea corridors.
WTI also rose strongly because global supply risks affect U.S. crude prices, even though the benchmark is more closely linked to domestic American conditions.
The difference in performance suggests that Thursday’s rally was driven primarily by international geopolitical risk.
The Market Is Pricing Threats, Not Confirmed Closures
The Strait of Hormuz had not been reported as closed.
The Iranian proposal was still under review, and the alleged tanker attacks had not caused confirmed major supply losses.
Oil prices therefore rose mainly because the probability of disruption increased.
Commodity markets often react before physical shortages appear.
Traders adjust prices based on expected future supply, transportation risks and the potential cost of escalation.
If the bill advances, attacks intensify or export flows decline further, the risk premium could increase.
If diplomatic progress resumes, part of the gain could reverse.
What Oil Traders Should Watch
The first factor will be whether Iran’s parliament advances or modifies the proposed Hormuz legislation.
The second will be the progress of U.S.-Iran negotiations.
Markets will also monitor whether Houthi attacks expand and whether Saudi Arabia confirms damage to tankers or other infrastructure.
Shipping flows through the Strait of Hormuz, the Red Sea and the Gulf of Aden will provide direct evidence of any disruption.
The condition of the Russian refinery and the outlook for Gulf exports will also affect supply expectations.
Conclusion
Oil prices rose by more than $3 per barrel as traders responded to renewed concerns about major Middle Eastern shipping routes.
Brent settled at $82.49, while WTI closed at $77.29.
The main catalyst was Iran’s review of a proposal to ban U.S., Israeli and other hostile vessels from the Strait of Hormuz and fine violators up to 20% of their cargo value.
Houthi attacks, lower Gulf exports and threats against regional energy infrastructure added to the risk premium.
Final Takeaway
The oil rally was driven by the growing possibility of disruption rather than a confirmed closure of Hormuz or a major loss of supply. Prices will remain highly sensitive to Iranian legislation, U.S.-Iran diplomacy, Houthi activity and the security of Gulf and Red Sea energy routes.
