Iran announced attacks on oil facilities in Bahrain and Saudi Arabia following Israeli strikes on Iranian oil storage sites, escalating a conflict that is already disrupting global oil supplies and prompting market volatility. The attacks, carried out using drones, represent a new phase in the rapidly escalating tensions between Iran, the United States, and Israel.
The immediate trigger for the current crisis is the disruption of oil tanker traffic through the Strait of Hormuz. While not formally closed, major shipping companies are avoiding the vital waterway due to fears of attacks by Iranian forces, or the inability to secure adequate insurance coverage. This reluctance to navigate the Strait is leading to a build-up of crude oil inventories in Gulf states, with Iraq already reducing its daily production from 4.3 to 1.3 million barrels.
The price of Brent crude surged to nearly $120 a barrel yesterday, a 30% increase from the previous day’s $92, before settling at $90.3, still 27% higher than before the conflict began. The volatility reflects market anxieties over potential supply shortages comparable to those experienced in the 1970s, also triggered by conflicts in the Gulf region.
In response to the escalating situation, the G7 nations have agreed to collectively release oil reserves if necessary. U.S. President Donald Trump stated that the United States could take control of the Strait of Hormuz and asserted that the conflict was “practically finished.” However, Qatar’s Minister of Energy cautioned that Gulf states may be forced to significantly reduce production and exports in the near future, potentially driving Brent crude prices to $150 a barrel.
The turmoil in the oil market has had a ripple effect on global financial markets. Asian stock exchanges fell between 5% and 7%, European markets declined by as much as 1%, and the Lima stock exchange dropped 1%. Wall Street partially recovered, rising 0.85%.
Investors have sought refuge in the U.S. Dollar, driving its value in Peru close to S/ 3.50. The Central Reserve Bank of Peru (BCRP) intervened in the foreign exchange market, placing derivatives swaps totaling nearly S/ 1,500 million to stabilize the currency. Analysts believe the BCRP is attempting to prevent the exchange rate from exceeding S/ 3.50, to avoid inflationary expectations.
Marco Contreras, head of research at Kallpa SAB, attributed the oil price turbulence to the disruption of traffic through the Strait of Hormuz and expectations of a substantial reduction in global crude supply. He noted that the price could stabilize if passage through the Strait resumes, but fluctuations are likely to continue as the conflict progresses.
Jorge Ramos, chief capital markets & investor relations officer at Fibra Prime, indicated that S/ 3.50 represents a key psychological level for the Peruvian currency, which the BCRP will attempt to defend. He emphasized Peru’s record high level of reserves, suggesting the central bank has the capacity to moderate the dollar’s rise, at least in the short term.
Analysts suggest that S/ 3.50 may act as a temporary ceiling for the dollar, but the BCRP may allow the currency to appreciate further if demand continues to increase, while only moderating the pace of the ascent.
