Oil prices have surged following reports that the US is preparing for an ‘extended’ blockade of Iran. Brent crude briefly hit $119 (£88) a barrel on Wednesday evening, marking the highest price so far this month and a nearly 7% rise in a single day.
The BBC understands that energy executives, including Chevron chief executive Mike Wirth, met President Donald Trump at the White House on Tuesday to discuss strategies for limiting the conflict’s impact on American consumers. Oil traders appear to have interpreted this meeting as a signal that the effective closure of the Strait of Hormuz will persist for a prolonged period.
According to a White House official, the executives discussed various topics, including domestic energy production, progress in Venezuela, oil futures, natural gas, and shipping. They characterized the meeting as part of the President’s regular consultations with energy executives regarding their industry.
This meeting follows separate reports from the Wall Street Journal indicating that US President Donald Trump has instructed aides to prepare to extend the ongoing blockade of Iran’s ports, aiming to intensify economic pressure on the country. Iran has stated its intention to continue disrupting traffic through the Strait of Hormuz in response to the US blockade.
Oil prices have experienced sharp fluctuations since the war began, as the crucial Strait of Hormuz has been effectively closed for weeks due to the conflict. Iran has severely restricted shipping through the strait—which typically carries about a fifth of the world’s supply of oil and liquid natural gas—in response to US and Israeli strikes that commenced on February 28. Earlier this month, Tehran warned that any vessel approaching the strait would be targeted. The US subsequently announced that its forces would intercept or turn back vessels traveling to or from Iran’s ports. Analysis by BBC Verify shows that at least four vessels tracked from Iranian ports appear to have crossed the US blockade line.
Despite recent weeks’ fluctuations, the price of oil remains significantly higher than its pre-conflict level. Brent crude dropped to $90 a barrel on April 17, following a ceasefire announcement between Israel and Lebanon, and the US pausing attacks on Iran on April 8. However, the oil benchmark has been rising steadily over the last 12 days as the US continued its blockade.
Lindsay James, investment strategist at Quilter, noted that the war’s impact in the UK has largely been confined to higher petrol and diesel prices so far. Still, she warned that “every day that passes without a resumption of supply sees the risk of physical shortages and steeper price rises on a range of goods increasing.”
Crude oil is a vital global economic resource, used for fuels like petrol, kerosene, and diesel, and as a base for many household goods, including plastics and clothing. Brent crude, based on a blend of oils primarily produced in the North Sea, is one of the most widely used international benchmarks for crude prices globally. Contracts to buy and sell oil often reference Brent crude’s price, significantly influencing global energy prices. The US consumes nearly 19 million barrels of oil per day (18.7% of the world’s oil).
The Iranian economy faces a deepening crisis, marked by rapidly rising prices, a falling currency value, and the prospect of oil exports grinding to a halt. According to the Statistical Center of Iran, the annual inflation rate has climbed to 53.7%. The country’s currency, the rial, has fallen to a record low. The Iranian government stated last week that approximately two million Iranians have lost their jobs, directly or indirectly, as a result of the war.
On Wednesday, Trump urged Iran to ‘get smart soon’ and sign a deal, following days of deadlock in efforts to end the conflict. In a post on Truth Social, Trump commented that the country ‘couldn’t get its act together.’ The Wall Street Journal cited US officials who said the president had instructed aides to prepare for an extended blockade of Iran’s ports to force Tehran’s hand. Officials indicated that Trump chose to continue squeezing Iran’s economy and oil exports with the blockade, as his other options—resuming bombing or disengaging from the conflict—carried greater risk, according to the report. Iranian officials stated on Tuesday that the country could withstand the blockade by utilizing alternative trade routes.
The World Bank on Tuesday forecast that energy prices would surge by 24% in 2026 to their highest level since Russia’s full-scale invasion of Ukraine four years ago, assuming the most acute disruptions from the Iran war conclude in May.
European stocks fell on Wednesday as investors processed a wave of corporate earnings and awaited the US Federal Reserve’s latest interest rate decision. The FTSE 100 closed down 1.2%, while the pan-European Stoxx index fell 0.7%. France’s Cac was down 0.39% at close, and Germany’s Dax was down 0.27%. In the US, the Nasdaq made marginal gains in early trading, while the S&P was down 0.15% at opening. Asian stock markets mostly rose Wednesday, continuing their recovery after being particularly hard hit by the initial shock from the war.
Kathleen Brooks, research director at XTB, commented: “Financial markets will now need to price in the prospect of a prolonged blockade.”
#OilPrices #IranBlockade #StraitOfHormuz #BrentCrude #GlobalEconomy #EnergyCrisis #MiddleEastConflict #USsanctions #MarketImpact #Geopolitics
Leave a Reply