Oil prices have surged following reports that the US is preparing for an “extended” blockade of Iran. The global benchmark oil price, Brent crude, briefly hit $120 (£89) a barrel on Wednesday evening, marking its highest price since 2022.
US Officials Discuss Blockade Impact
The BBC understands that energy executives, including Chevron chief executive Mike Wirth, met US President Donald Trump at the White House on Tuesday. The discussion focused on strategies to limit the conflict’s fallout on American consumers. Oil traders reportedly interpreted this meeting as a signal that the effective closure of the Strait of Hormuz could persist for an extended period. Topics discussed included domestic energy production, progress in Venezuela, oil futures, natural gas, and shipping, according to a White House official. The meeting was described as part of the President’s regular engagements with energy executives.
Blockade Extension and Iran’s Response
These developments follow separate reports from the Wall Street Journal, indicating that US President Donald Trump has instructed aides to prepare for an extension of the ongoing blockade of Iran’s ports. This move is aimed at intensifying pressure on the country’s economy. In response, Iran has stated its intention to continue disrupting traffic through the Strait of Hormuz.
Impact on Global Shipping and Oil Supply
The price of oil has experienced significant fluctuations since the conflict began, largely due to the effective closure of the crucial Strait of Hormuz for several weeks. Iran has severely restricted shipping through the strait, which typically handles about one-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. Subsequently, the US announced that its forces would intercept or turn back vessels traveling to or from Iran’s ports. Analysis by BBC Verify suggests that at least four vessels tracked from Iranian ports appear to have crossed the US blockade line.
Despite recent fluctuations, the price of oil remains significantly higher than its pre-conflict level. Brent crude had dropped to $90 a barrel on April 17 after a ceasefire between Israel and Lebanon was announced, and the US paused attacks on Iran on April 8. However, the oil benchmark has been steadily rising over the last 12 days as the US blockade continued.
Economic Repercussions for Iran
The Iranian economy is reportedly facing a deepening crisis, characterized 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 also 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 conflict.
Political Stance and Alternatives
On Wednesday, President Trump urged Iran to “get smart soon” and sign a deal, following days of deadlock in efforts to resolve the conflict. In a post on Truth Social, Trump commented that the country “couldn’t get its act together.” US officials, cited by the Wall Street Journal, stated that the president had instructed aides to prepare for an “extended” blockade of Iran’s ports to compel Tehran’s cooperation. Officials indicated that Trump chose to continue pressuring Iran’s economy and oil exports through the blockade, as other options—such as resuming bombing or disengaging from the conflict—were perceived to carry greater risks. Iranian officials, however, stated on Tuesday that the country could withstand the blockade by utilizing alternative trade routes.
Global Economic Outlook and Market Reactions
The World Bank on Tuesday forecasted that energy prices could surge by 24% in 2026, reaching their highest level since Russia’s full-scale invasion of Ukraine four years ago, assuming the most severe disruptions caused by the Iran conflict conclude in May. European stocks saw declines on Wednesday as investors processed corporate earnings and awaited the US Federal Reserve’s latest interest rate decision. The FTSE 100 index in the UK closed down 1.2%, France’s Cac was down 0.39%, and Germany’s Dax fell 0.27%. In the US, the S&P 500 closed flat. Asian stock markets mostly rose on Wednesday, continuing their recovery after being particularly affected by the initial shock of the conflict.
The Significance of Crude Oil
Crude oil is a vital resource in the global economy, serving as fuel for refined products like petrol, kerosene, and diesel, and as a base for numerous household goods, including plastics and clothing. Brent crude, derived from a blend of North Sea oils, is one of the most widely used international benchmarks for global crude prices. Its price significantly influences global energy prices as contracts to buy and sell oil often reference it. In 2024, 101 million barrels were consumed daily worldwide, with the US consuming nearly 19 million barrels per day (18.7% of the world’s oil).
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