Oil prices surged as renewed hostilities between the US and Iran led to conflicting claims about the Strait of Hormuz's navigability. Brent crude traded above $79 a barrel after rising 5.4% last week, while West Texas Intermediate (WTI) traded near $74. Iran declared the strait closed "until further notice," but US Central Command (Centcom) contradicted this, stating its forces initiated more attacks to ensure freedom of navigation. The Strait of Hormuz typically transports about a fifth of global crude and liquefied natural gas.
The latest US strikes on Sunday afternoon marked the fourth in a week, launched in response to an Iranian attack on a Cyprus-flagged container ship. CNN reported that the Islamic Revolutionary Guard Corps fired at commercial vessels again, and US aircraft intercepted an Iranian cruise missile and attack drone. Iranian media reported explosions near Bandar Abbas and retaliatory drone and missile assaults on US allies including Kuwait, Jordan, and Qatar.
The escalation has introduced a "war premium" into crude prices, reversing earlier gains that followed an interim peace deal offering prospects of increased supply from the Persian Gulf. The International Energy Agency warned that the flare-up risks derailing efforts to rebuild depleted global oil inventories later this year. Saul Kavonic, a senior energy analyst at MST Marquee, characterized the escalation as "well short of all-out hostilities" but expects oil prices to climb as long as strikes continue and passage through the strait remains hesitant.
Prospects for diplomacy have dimmed, with Iran's Parliament Speaker Mohammad Bagher Ghalibaf declaring the "era of one-sided deals is OVER" and insisting Washington honor prior commitments before talks can resume. President Donald Trump also declared the ceasefire "OVER" but expressed willingness for negotiations. The attack on a Kuwaiti oil drilling facility, the first direct strike on oil infrastructure in weeks, could push oil prices to $100 if the conflict expands to target energy infrastructure more broadly. European natural gas futures also rose by as much as 2.7% due to concerns over hampered shipments from Persian Gulf producers.
In the past month, Persian Gulf producers, including the United Arab Emirates, had marketed additional crude following the interim agreement. The Emiratis notably used shuttle tankers that sailed dark to move barrels, but the current tensions have caused traffic through the strait to be almost nonexistent, extending a slowdown that began last week. The Joint Maritime Information Center, however, maintains that the southern shipping lane coordinated by Oman remains available.
