Fuel price rally as US-Iran conflict escalates

Following the collapse of the ceasefire between Iran and the US, with both sides launching fresh attacks, Iranian attacks on Gulf states and the renewed closure of the Strait of Hormuz, a new fuel price rally has started. The oil price has risen by almost a fifth in ten days and is now higher than it was a month ago. Gas prices have risen by a quarter and are now at their highest level in almost four months.While at the start of last week the oil market remained remarkably calm amid renewed tensions between the US and Iran and attacks on tankers, the conflict has since escalated again. As a result, the price of a barrel of Brent oil has also risen sharply. On Monday 6 July, a barrel of crude Brent oil cost $71.99. Ten days later, at the time of writing, the price is $85.80. That means the oil price has risen by 19.2%.Diesel is following the same pattern, although the curve is less steep. On 5 July, the LTO member price for 100 litres (from 4,000 litres) was €154.17 and on 16 July the price for the same volume is €173.75, an increase of 12.7%.At the start of last week, several tankers were hit in attacks in the Strait of Hormuz. During the week it became increasingly clear that the ceasefire was over. On Saturday, Iran declared the strait closed. The US carried out attacks on Iran for the fifth night in a row overnight. The US has also resumed the maritime blockade of Iranian ports and an abandoned oil tanker has been attacked by the American military. Iran retaliated with attacks on Gulf states.As before, the closure of the Strait of Hormuz does not mean that shipping has come to a complete halt. According to CNN, based on data from Kpler, just thirteen merchant vessels, including many tankers, passed through the Strait of Hormuz yesterday (15 July). After the ceasefire in mid-June, shipping through the Strait of Hormuz gradually recovered to an average of about 36 transits per day according to data cited by the Financial Times. Still less than usual. According to the Joint Maritime Information Center, an average of 138 ships per day passed through the strait before the conflict.Gas price reaches four-month highThe gas price has risen even more sharply than the oil price. Ten days ago, the TTF gas price was €44.31 per megawatt hour. At the time of writing, the price is €55.42 per megawatt hour. That is an increase of 25.1%.In the US, domestic gas is in ample supply and gas prices have therefore fallen there. That is not the case in Europe, where the renewed flare-up of the conflict between the US and Iran is clearly reflected in prices. Although relatively little gas in Europe is imported directly from the Middle East, Europe is competing with other regions for US LNG supplies. Asia in particular imports large volumes of LNG from Qatar.In addition, demand for gas remains high because of the high temperatures and the need for gas-fired power generation to meet electricity demand from air conditioning.ElectricityAverage day-ahead prices on Epex Spot varied last week between €73.49 per megawatt hour on 12 July and €150.85 yesterday.