Brent crude closed at $95.70 on September 2, up 4.5% in two trading sessions, after the United States struck Iran’s Larak Island on August 30. The Pentagon said the strike targeted rocket launchers being prepared to fire naval mines into the Strait of Hormuz. Iran responded with strikes on U.S. assets in Jordan and the United Arab Emirates, the first major exchange between the two sides in more than a month.
A Different Kind of Target
For most of the past six months, the risk priced into oil has been about harassment: Iranian forces threatening individual tankers, collecting tolls, occasionally seizing a vessel. The Strait of Hormuz has been effectively closed to normal commercial traffic for 185 days, with throughput running at roughly 7% of the 85 vessels a day that transited before the crisis began in February, and war-risk insurance now running as high as $10 million per supertanker voyage. The U.S. Navy has continued escorting roughly 30 ships through the strait most nights despite the nominal closure.
A mine threat against the strait itself is a different category of risk. Harassment slows and taxes shipping. A mined channel closes it, for however long clearance takes, regardless of how many ships the U.S. Navy is prepared to escort. That distinction is why Brent’s reaction to the August 30 strike has been sharper than its reaction to most individual skirmishes over the summer.
Brent’s daily close over the past month shows a steady climb through August that accelerated sharply after the Larak Island strike, from $88.37 on August 31 to $95.70 by September 2.
Daily close data. The acceleration after August 30 followed a U.S. strike on Iran’s Larak Island targeting rocket launchers the Pentagon said were prepared to fire naval mines into the strait.
Base Case Versus Tail Risk for Canadian Portfolios
The base case, reflected in prediction markets pricing only a 1% probability of normalization by September 15 and 27% by year-end, is that disruption continues at roughly its current level: managed, expensive, but not existential to global supply. That base case has already supported Canadian energy equities, with the TSX energy sub-index tracking Brent’s climb through the summer.
The tail risk is a successful mining operation that closes the strait outright, even briefly. That scenario would push Brent well past its March peak above $100, on a timeline the Bank of Canada has already flagged as a trigger for departing from its current hold. Canadian energy holders benefit either way in the near term. Rate-sensitive sectors, financials, REITs and long-duration bonds, do not.