The F Samsung Crude Oil Futures ETF (HKEX: 03175) has surged more than 5%. At the time of writing, the ETF is up 4.7%, trading at HK$10.14 with a turnover of HK$3.8336 million.

The catalyst for this move stems from developments concerning the Strait of Hormuz. According to reports citing informed sources, the volume of traffic passing through the critical waterway has dropped to zero. The sources indicated that the strait will remain closed and Iran will not grant passage permits to any vessels as long as the United States continues its provocative actions. This has reignited tensions between U.S. forces and Iran, plunging the Strait of Hormuz into a renewed crisis.

Key Economic Implications

In a recent report, Capital Economics highlighted the severe potential consequences. The analysis suggests that if the Strait of Hormuz were to remain closed for an extended period, the price of Brent crude oil could skyrocket to $150 per barrel. Such a scenario would likely trigger a resurgence in global inflation, compelling major central banks to continue raising interest rates even amidst slowing economic growth.

Recent Market Action

The geopolitical tensions have already impacted the oil market. Over the weekend, following a significant escalation in military hostilities between the U.S. and Iran, the international oil benchmark, Brent crude futures, surged by 3% during Asian trading hours on July 20th, briefly breaking through the significant $90 per barrel threshold.

Analyst Perspective

Everbright Securities has provided its analysis on the situation. The firm notes that peak season demand for refined oil products is approaching, yet global inventories for both crude oil and refined products are critically low. The International Energy Agency has already issued warnings about potential shortages of gasoline and diesel. Everbright Securities warns that if the U.S.-Iran conflict persists, the regulatory mechanisms of the crude oil market could fail, potentially leading to even more severe market volatility.