WTI crude closed at $93.78 Tuesday, up 15.4% from $81.16 on August 10 and up 9.4% since Monday alone, when Iran attacked the Saudi-flagged tanker Sidr in the Strait of Hormuz and killed two Filipino crew members. The tail risk that Geopolitical Desk readers have been tracking since February, that the Hormuz conflict eventually reaches the tanker lanes themselves rather than just the coastline, is no longer theoretical. It happened this week.
What Actually Happened in the Strait
Saudi Arabia's Foreign Ministry condemned the attack and called for halting escalations. Iran's Revolutionary Guard claimed the tankers caught fire after striking mines, a framing Qatar and Kuwait both rejected as a violation of international law. Vessel traffic through the strait, which averaged 120 to 140 ships a day including roughly half tanker traffic carrying 20 million barrels before the wider conflict intensified in July, fell to 10 vessels on the day of the attack, down from 16 the day before. War-risk insurance on a transit has risen from 1 to 3% of a ship's hull value before the conflict to 7.5 to 10% now, adding roughly $21 million to the cost of insuring a standard 270,000-tonne tanker for one voyage.
Base Case Versus Tail Risk
The base case, which the Geopolitical Desk has held since the ceasefire in June, is that Hormuz traffic finds a workaround: rerouted cargoes, higher insurance costs absorbed into freight rates, and a persistent but bounded oil premium. This week's attack does not overturn that base case. Two sailors killed and a sharp single-day drop in transits is a severe escalation, but it sits within the pattern of intermittent strikes the strait has seen since February, not a full closure. The tail risk, a sustained blockade that removes Gulf barrels from the market for weeks rather than days, remains a minority scenario, not the expected one.
WTI's run from $81 to $94 over the past month tracks the escalation almost session for session, with the sharpest single move landing the day after the tanker attack.
The shaded band marks the surge since the August 31 attack on the tanker Sidr. War-risk insurance on a Hormuz transit has risen from 1 to 3% of hull value to 7.5 to 10%. Source: Investing.com, Al Jazeera.
The Canadian Mechanism Is the Currency, Not Just Energy
The obvious Canadian read-through is the TSX energy sub-index, which trades up alongside the crude price. The less obvious one is the Canadian dollar. USD/CAD has held near 1.3803 this week, a smaller move than the oil price alone would suggest, because the loonie is a commodity currency and a sustained oil premium is one of the few forces currently working in CAD's favour against a backdrop of retaliatory tariffs. For a portfolio manager, that makes the Hormuz story a partial offset to the tariff story rather than a second, independent headwind, and that offset only holds for as long as the oil premium does.