Oil prices climb 2% as US-Iran hostilities threaten global supply chains

Oil prices surged 2% on Wednesday as escalating U.S.-Iran hostilities intensified fears of global supply chain disruptions, with Brent crude hitting a one-month high and West Texas Intermediate following suit. The surge came after President Donald Trump reimposed a naval blockade on Iranian ports, while Iran's Islamic Revolutionary Guard Corps (IRGC) warned of closing "all other export corridors that benefit the U.S. And its allies." The Strait of Hormuz, through which about a fifth of the world's oil and liquefied natural gas passes, became a focal point of the conflict, with attacks and counterattacks threatening to further destabilize energy markets.

Brent futures climbed $1.71, or 2%, to $86.44 a barrel, while West Texas Intermediate (WTI) gained $1.43, or 1.8%, to $80.77 a barrel. Prices had already risen 2% the previous day, driven by supply disruptions in the Strait of Hormuz, where attacks on commercial vessels earlier in the week exacerbated tensions. Analysts noted that Iran's threats to leverage its Houthi allies in Yemen to block the Bab el-Mandeb strait—another critical energy artery—added to the uncertainty. "Regional energy exports are either shared by all, or denied to all," the IRGC stated, signaling a potential broader escalation.

The hostilities reignited last week, undermining a fragile truce reached in June after months of fighting. Early Wednesday, the U.S. Military launched fresh strikes to degrade Iranian capabilities targeting commercial shipping in the Strait of Hormuz. Trump, in a Fox News interview, hinted at future energy-related targets, saying, "I'll save the energy targets for last, but ultimately we'll hit energy targets." The U.S. Blockade has tightened the oil market, with Iranian crude exports estimated at 1.5 to 2 million barrels per day in the past two weeks, according to UBS analyst Giovanni Staunovo.

Goldman Sachs warned that Gulf exports had slipped below 50% of pre-war levels, or about 11 million barrels per day, after recovering to over 80% following a June memorandum of understanding between the U.S. And Iran. The bank projected that Brent crude could exceed $110 per barrel in the fourth quarter if export recovery stalls. Meanwhile, the Strait of Hormuz saw a sharp decline in traffic, with only three tankers transiting the waterway on Thursday, according to Kpler data, compared to 21 the day before.

Iran's military reported drone strikes on U.S. Positions in Jordan's Azraq base, though the Pentagon provided no immediate response. The IRGC also claimed attacks on weapons and storage facilities in Bahrain and Kuwait, though Reuters could not verify these reports. The U.S. And Iran exchanged tit-for-tat strikes, with Iran targeting U.S. Allies and the U.S. Escalating its campaign against Iranian infrastructure. QatarEnergy suspended plans to expand its Ras Laffan LNG facility after an Iranian attack on an LNG tanker in March, reducing production capacity by 17%. The country now operates at minimum safety levels, according to reports.

Analysts emphasized the precarious balance between escalation and diplomacy. "Ebbs and flows, that's what I'm expecting," said Andrew Wilson of BRS shipbrokers, noting that a lasting agreement between Tehran and Washington remains elusive. The human toll of the conflict continues to mount. Iran reported 14 deaths from U.S. Airstrikes over two days, while the U.S. Military confirmed strikes on Iranian targets, including air defenses and naval infrastructure. The funeral of Iran's late Supreme Leader Ayatollah Ali Khamenei, held in Mashhad, added a layer of political tension, with Iran vowing retribution for his killing. As the crisis unfolds, the interplay between military actions, diplomatic efforts, and market dynamics will shape the trajectory of global energy markets and supply chains.