Oil prices climbed further on Thursday, with global benchmark Brent crude hovering around the $120-a-barrel mark, as geopolitical tensions between the U.S. and Iran showed little sign of easing. The rally reflects growing concerns that supply disruptions could persist longer than initially expected.
June futures for Brent crude rose nearly 2% to trade at $120 per barrel, while U.S. benchmark West Texas Intermediate (WTI) edged up to around $107. The move follows a sharp surge in the previous session, when Brent jumped about 6% and WTI rallied 7%.
Brent at $120, WTI Lags But Holds Firm
Market sentiment turned sharply bullish after reports indicated that the U.S. is unlikely to ease restrictions on Iranian oil flows anytime soon. According to Axios, U.S. President Donald Trump rejected Tehran's proposal to reopen the Strait of Hormuz, reinforcing expectations of a prolonged naval blockade until a broader nuclear agreement is reached.
The latest leg of the rally has pushed Brent to its highest levels since mid-2022, underscoring how quickly geopolitical risk premiums have returned to oil markets.
Hormuz Choke Point Tightens Supply Outlook
At the heart of the price spike lies the Strait of Hormuz, a critical artery for global oil shipments. Analysts estimate that flows through the passage have dropped sharply, exacerbating fears of a supply crunch. Goldman Sachs noted that Iranian exports have effectively collapsed amid the blockade, with shipments through Hormuz falling to a fraction of normal levels. Limited storage capacity within Iran is compounding the disruption, raising the risk of prolonged supply tightness if restrictions remain in place.
The bank also flagged that potential output increases from the UAE—following its exit from OPEC—are unlikely to offer immediate relief. Any production ramp-up, analysts said, will likely play out gradually and may not offset near-term disruptions.
Demand Risks Emerge Beneath The Rally
Even as supply concerns dominate headlines, cracks are beginning to appear on the demand side. Goldman Sachs estimates that global oil consumption in April may be down by roughly 3.6 million barrels per day compared with February levels. The weakness is most visible in jet fuel demand and petrochemical feedstocks, suggesting that parts of the global economy may already be responding to elevated energy costs.
Markets are also factoring in heightened geopolitical rhetoric. Trump, in a social media post, warned Iran to “get smart soon,” adding to concerns that tensions could escalate further before any diplomatic breakthrough.
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