Iran Claimed Four Vessels Were Hit in the Hormuz Strait. Oil Prices Are Jumping Again.

Oil prices are jumping again on Friday after Iran said four vessels were hit in the Strait of Hormuz.

Brent crude, the international benchmark, gained more than 2% and stood above $113 a barrel at 8:08 a.m. ET, while West Texas Intermediate, the U.S. benchmark, climbed 1.94% and clocked in at $103.98 per barrel at the same time.

Tehran's remarks stand in contrast with those of U.S. Central Command (CENTCOM) chief Admiral Brad Cooper, who said Iranian naval forces no longer patrol the waterway. In a video posted on social media, Cooper said he saw dozens of commercial vessels crossing the strait and no Iranian military ones.

"They were not out there because Iran's Navy is all at the bottom of the sea," Cooper added.

Despite oil flowing at levels close or sometimes above pre-war levels, oil prices remain high. Natasha Kaneva, head of JPMorgan's global commodities strategy team, told The Wall Street Journal that she estimates Brent's fair value at $94 a barrel, considerably below its current price. But eight months into the Iran war, assessing oil's value has grown more complicated as traders weigh recovering exports against the threat of further military escalation.

One concern is what happens after next week's U.S. midterm elections. The Wall Street Journal reported that Washington has warned several Gulf Arab countries to prepare for a potentially short, intense military campaign against Iran. Renewed strikes could interrupt supplies again, undermining the export recovery.

Goldman Sachs estimates that the threat of fresh supply disruptions has added approximately $27 a barrel to Brent prices. Refiners are purchasing crude while they can obtain it, while investors are buying futures as protection against a possible energy shock.

The export rebound itself has also proved uneven. Persian Gulf shipments, including oil moving through the Strait of Hormuz and alternative routes, exceeded 24 million barrels daily in the week through Oct. 18, according to Kpler data cited by The Journal. That surpassed prewar exports of 23.3 million barrels a day.

By the week through October 26, however, shipments had fallen to at least 15.7 million barrels daily. Moving that oil remains dangerous and expensive. A record number of commercial shipping attacks near Hormuz this month has heightened risks for vessels and driven up insurance and freight expenses.

Exporters have increasingly depended on alternative pipelines and transfers between ships following attacks on tankers and infrastructure, including a crucial Saudi pipeline. Shipping crude from the Gulf to Asia cost almost $36 a barrel in early October, according to the International Energy Agency, more than five times the prewar cost.