Global oil prices climbed sharply after Donald Trump escalated rhetoric against Iran, issuing a new deadline tied to the reopening of the strategically critical Strait of Hormuz. Brent crude rose above $110 per barrel, while US benchmark WTI hovered near $113, as markets reacted to the heightened risk of supply disruptions.
Trump warned of potential strikes targeting Iranian infrastructure if access through the strait is not restored. Tehran, however, rejected the ultimatum, and restrictions on maritime traffic remain largely in place, allowing only limited vessel movement.
Supply Shock To Energy Crisis
The ongoing conflict has triggered what analysts describe as a severe supply shock, now evolving into a broader global energy crisis. Prices for crude and refined products have surged, adding to inflationary pressures worldwide and raising concerns over slowing economic growth.
Producer alliance OPEC+ flagged that damage to energy infrastructure could have long-term implications for supply, even after hostilities subside. While the group signaled higher output quotas, actual flows remain constrained due to bottlenecks in the Gulf.
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Brent's prompt spread - a key indicator of market tightness - has widened dramatically into steep backwardation, surpassing levels seen during the Russia-Ukraine war. Physical markets are flashing similar signals. Dated Brent, a benchmark for real-world cargoes, has surged past $140 per barrel - its highest level since 2008 - underscoring the scramble for immediate supplies.
Hormuz Remains The Critical Chokepoint
Control of the Strait of Hormuz - a vital artery linking Gulf producers to global markets - remains central to the crisis. Iran continues to regulate transit, permitting only select ships to pass. While there are tentative diplomatic efforts, including talks involving Oman, uncertainty persists over how quickly flows can normalize.
Investor sentiment has also been shaken by mixed messaging from Washington. Trump has alternated between suggesting a quick resolution and threatening escalation, including expanded military action. With the conflict entering its sixth week and attacks continuing across the region, oil markets remain firmly on edge.
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