Global oil prices increased sharply for the second consecutive day on Tuesday after Iran announced its decision to shut down the crucial Strait of Hormuz and declared its intention to attack any ship that tried to cross the waterway.

US crude oil futures experienced a 7% increase which raised prices by $5.02 to $76.31 per barrel at 8:30 a.m. ET. The global benchmark Brent crude price increased by 7.3% which added $5.62 to bring the price to $83.39 per barrel reaching its highest point in recent weeks.

Strait of Hormuz Tensions Drive Rally

The oil markets have experienced a more than 14% increase this week because tanker operations through the Strait of Hormuz which serves as a vital maritime chokepoint have completely stopped. The narrow passageway handles approximately 20% of global oil consumption which China India Japan and South Korea use as their main export routes.

The Iranian authorities announced that they would attack any ships that tried to cross the Strait which caused energy markets to experience supply chain concerns and subsequent price fluctuations.

Natural Gas Prices Spike

The crisis has caused natural gas prices to reach new heights. European gas futures increased by over 70% during this week after Qatar halted liquefied natural gas (LNG) production because of the reported Iranian drone attacks.

The British natural gas futures contract increased by around 30% on Tuesday while the Dutch benchmark experienced a rise of approximately 27%. The Gulf region which includes Qatar as the main exporter through the Strait of Hormuz handles about 20% of global LNG exports.

$100 Oil on the Horizon?

Wall Street commodities strategists warn that oil prices could climb above $100 per barrel if the Strait remains closed for an extended period. A prolonged disruption would create challenges for global supply chains which would result in increased inflation rates throughout the world.

Market participants monitor diplomatic and military activity in the area which will affect energy prices through their impact on regional conflict reduction or escalation.