Oil Price Jump: What Happens If the Strait of Hormuz Reopens?

oil price today: Oil prices rose by up to 2% on Wednesday. Along with this, China and Pakistan have demanded the opening of Hormuz and the restoration of stability.

US President Donald Trump's recent remarks have sparked some hope for an end to the ongoing conflict in the Middle East. However, despite this, crude oil prices saw a 2% increase on Wednesday, April 1. For most of March, following the conflict, oil prices remained above the $100 mark, primarily due to the closure of the Strait of Hormuz. Concurrently, the UAE called for a military alliance to reopen the Strait, and China-Pakistan presented a five-point ceasefire proposal.

Crude Oil Prices in the Market

On Wednesday, Brent crude jumped 1.8% to reach $105.8 per barrel. It had fallen by 3.2% on Tuesday. Alongside this, WTI crude also rose 1.7% to $103 per barrel. In India, crude opened 1.34% higher on MCX at Rs 9,697 per barrel. Prior to this, due to the closure of the Strait of Hormuz, crude remained above $100 for most of March. In March, Brent crude recorded a monthly increase of 59% and WTI 58%.

China-Pakistan Step Forward to Reopen Hormuz

Earlier, on the diplomatic front, three major developments occurred on Tuesday. Following a meeting between the Foreign Ministers of China and Pakistan, a five-point proposal emerged, demanding an immediate ceasefire, safe shipping in Hormuz, and the restoration of stability in the Gulf.

On the other hand, according to a report by The Wall Street Journal (WSJ), the UAE has requested the formation of an alliance comprising American, European, and Asian military powers to ensure the reopening of the Strait of Hormuz.

In addition to all this, according to Bloomberg, White House Press Secretary Karoline Leavitt confirmed that Trump would address the nation at 9 PM Eastern Time on Wednesday.

Why Will Crude Remain High Even if Hormuz Reopens?

Even if the Strait of Hormuz is reopened due to these efforts, crude oil prices are expected to remain high. This is because the energy infrastructure in the Gulf countries has suffered significant damage. Restoring supply could take weeks, if not months. Iraq's production has fallen by 73%, Qatar's LNG exports are affected, and ensuring the security of maritime routes will also take time.