Tolls on tankers crossing the Strait of Hormuz are not a factor in oil price projections, with flare-ups in the US-Iran conflict expected to keep costs around $80 a barrel in the short term, Standard Chartered has said.

By the end of this year, prices are likely to taper towards the $70 mark, but are unlikely to hit the $60 lows seen at the start of this year, Manpreet Gill, the bank’s chief investment officer of Africa, Middle East and Europe said on Tuesday.

“Directionally, we believe that we are eventually heading for lower oil prices … we have an $80 [per barrel] expectation and we tend to think of the short term as one to three months,” Mr Gill said.

The short-term estimate assumes that the escalation will go on “for a little bit longer”. However, efforts to reach a resolution, “or more supply being able to find its way around the constraints”, looks set to drive prices down to the $70-a-barrel level.

However, “we don’t expect oil to go back to $60 immediately, and by that I mean the rest of this year … we may end up there next year”, Mr Gill added.

War premium

Oil prices shot up to hit an intraday high of $126 a barrel in April, after the start of the Iran war on February 28. The war premium, however, faded gradually after US and Iran agreed to a two-month ceasefire to pursue a permanent peace deal.

Prices, which fell below the prewar level of $72 a barrel this month, shot up again after Iran hit oil tankers in the Strait of Hormuz last week, prompting the US to strike Iranian targets.

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The US and Iran have said they no longer honour the ceasefire agreement and have escalated tit-for-tat strikes. Iran declared the Strait of Hormuz closed earlier this week and on Tuesday it hit two UAE supertankers in Oman’s territorial waters.

The escalation sent oil prices to their highest level in a month on Tuesday, after posting a more than 9 per cent jump in the previous session.

Brent, the benchmark for two thirds of the world’s oil, was trading 4.80 per cent higher at $87.23 per barrel at 3.13pm UAE time, while West Texas Intermediate, the gauge that tracks US crude, was up 3.57 per cent at $80.93 a barrel.

Crude prices are currently at their highest level since the US and Iran signed an interim deal to end the war on June 17. However, they are unlikely to hit the $100 per barrel market this year again, despite the escalation, Mr Gill said.

US toll

The US has also reinstated its naval blockade on Iran, with President Donald Trump saying he would charge vessels a tax to cross the strait under the watch of American forces.

In a post on social media, Mr Trump described the US as the “guardian of the Hormuz Strait” and said that as a “matter of fairness”, the US would be reimbursed by vessels transiting the waterway “at the rate of 20 per cent on all cargo shipped”.

A 20 per cent fee on ships crossing the Strait of Hormuz could set a single supertanker back around $34 million every trip, at current oil prices. The surprise announcement by Mr Trump is a complete U-turn from Washington’s stated policy that no nation has the right to impose transit fees in the strait.

Mr Gill however said Standard Chartered’s oil price estimates do not factor in proposed tolls either by US or Tehran.

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“At the moment that’s not something we’re incorporating,” he said. The narrative has been changing with regularity and there is no certainty if “there is going to be a toll at all … we just have a bunch of public pronouncements”.

Analysts, he said, can run different scenarios in terms of how a toll can impact prices, but “sitting here today, without having insight into what the equilibrium of the conflict ends up at, it’s very hard to say”, Mr Gill added.