Secretary of Energy Chris Wright is highlighting progress despite the ongoing conflict between the U.S. and Iran. During an Atlantic Council conference on Tuesday, Wright said the traffic conducted through the Strait of Hormuz had improved.
When asked how much ship traffic had increased through the strait, Wright said it had risen “very meaningfully,” compared to a week or two ago. Vessels have reportedly begun passing through the strait at night with their communications equipment turned off.
The market showed signs of a positive response following Wright’s comments. U.S. oil prices dropped 3.4 percent to $88.20 per barrel. In the global market, prices dropped 2.97 percent to $91.45 per barrel. Analysts have estimated that as many as 2 million barrels of oil per day might be transported through the strait aboard ships that are turning off transponders to avoid detection.
Wright indicated that traffic through the Strait of Hormuz would continue to increase, thereby improving global oil exports. The market sustained the positive reaction even after President Trump stated the U.S. would respond to the shooting down of a military helicopter by Iran, a development which could potentially delay the negotiation process.
The Strait of Hormuz channels the transportation of approximately 20% of the global supply of oil and liquefied natural gas. The passage of vessels through the strategically important strait has largely been on hold since hostilities commenced between the U.S. and Iran at the end of February. Although negotiations have been ongoing, traffic through the strait has not resumed to normal prewar levels. The U.S. Navy has reportedly facilitated the passage of as many as 40 ships through the strait despite its closure.
The closure of the strait has put pressure on the oil market, resulting in broad impacts across the global economy. In light of the disruption, President Trump has continued to push for a peace deal acceptable to the U.S. that would allow passage through the strait to resume. Wright also warned that once the conflict ended, it would take months to restore normal traffic flow through the Strait.