Oil Markets Rally as Hormuz Disruption Risks Grow

Global oil prices surge as Brent tops $118 and nears $122 amid Iran blockade tensions and fears of prolonged Strait of Hormuz supply disruptions.

Cover Image Attribute: The file photo of Transocean Development Driller III, somewhere in Gulf of Mexico / Source: Wikimedia Commons

 Oil prices surge above $118 per barrel as U.S.-Iran tensions prolong disruption in Strait of Hormuz 
Global oil prices climbed sharply on Wednesday, with Brent crude futures closing above $118 per barrel after U.S. President Donald Trump signaled that the naval blockade of Iran would continue until Tehran agrees to a nuclear deal, heightening concerns over prolonged supply disruptions in the Strait of Hormuz.
The escalation pushed international benchmark Brent crude up about 6 percent to settle at $118.03 per barrel. U.S. West Texas Intermediate futures advanced nearly 7 percent to $106.88. In subsequent trading, prices extended gains, with Brent briefly surpassing $120 and reaching as high as $122 earlier in the session, its highest level since 2022. Front-month contracts traded even higher, underscoring acute tightness in near-term supply.
The latest rally reflects market expectations of extended interruptions to oil flows through the Strait of Hormuz, a critical chokepoint that normally carries around one-fifth of global oil and liquefied natural gas supplies. Iran has restricted most non-Iranian shipping through the waterway since late February in response to U.S. and Israeli military actions that began on Feb. 28. The U.S. has countered by blockading vessels linked to Iranian ports.
President Trump told Axios on Wednesday that the blockade was proving more effective than military strikes. “They are choking like a stuffed pig, and it is going to be worse for them,” he said. “They can’t have a nuclear weapon.” Trump added that the measure would remain in place until Iran reaches a nuclear agreement.
The Wall Street Journal reported that Trump had directed aides to prepare for an extended blockade of Iranian ports to further pressure the country’s economy. U.S. officials cited in the report indicated that this approach carried lower risks than resuming bombings or withdrawing from the conflict.
On Tuesday, Trump met at the White House with energy industry executives, including Chevron Chief Executive Mike Wirth, to discuss strategies for mitigating the impact on U.S. consumers. Topics included domestic energy production, developments 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 consultations with the sector.
Traders and analysts interpreted the discussions and related signals as confirmation that the Hormuz disruption could persist for months. The International Energy Agency has characterized the situation as the biggest energy crisis in history.
U.S. Energy Information Administration data showed steep declines in both crude and gasoline inventories, adding to upward pressure on prices amid the geopolitical risks.
Negotiations to resolve the conflict have stalled. Iran has refused to reopen the strait until the U.S. lifts its blockade. Tehran has maintained that it can withstand the pressure through alternative trade routes, while warning that vessels approaching the strait could be targeted. BBC Verify analysis indicated that at least four vessels tracked from Iranian ports had crossed the U.S. blockade line.
The Iranian economy is under significant strain. Annual inflation has reached 53.7 percent, the rial has hit a record low, and around two million Iranians have lost jobs directly or indirectly linked to the conflict, according to Iranian government figures.
The World Bank forecast that energy prices could surge 24 percent in 2026 to their highest levels since Russia’s full-scale invasion of Ukraine in 2022, assuming the most acute disruptions from the Iran conflict end in May.
In a related development, the United Arab Emirates confirmed it would leave OPEC effective May 1. Analysts described the move as a significant shift that weakens the producer group, though its immediate market impact is expected to be limited given current physical supply constraints. OPEC+ is still anticipated to agree to a modest output increase of around 188,000 barrels per day at its meeting on Sunday.
Strategists at Dutch bank ING noted that the UAE’s exit represents “a big blow” to OPEC and could be viewed favorably by the U.S. as it reduces the cartel’s influence. However, they emphasized that near-term price drivers remain centered on Persian Gulf developments and the timeline for resuming flows through the strait.
Lindsay James, investment strategist at Quilter, said the conflict’s impact in markets such as the UK has so far been confined mainly to higher petrol and diesel prices. “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,” she added.
Oil prices have fluctuated in recent weeks. Brent fell to $90 per barrel on April 17 following announcements of a ceasefire between Israel and Lebanon and a U.S. pause in attacks on Iran. The benchmark has since risen steadily over 12 days as the blockade continued. Prices remain substantially above pre-conflict levels.
Broader financial markets showed mixed reactions. European stocks declined on Wednesday, with the FTSE 100 down 1.2 percent, France’s CAC 40 falling 0.39 percent and Germany’s DAX slipping 0.27 percent. The U.S. S&P 500 closed flat. Asian markets mostly rose, recovering from earlier losses triggered by the initial conflict shock.
Kathleen Brooks, research director at XTB, said financial markets would now need to price in the prospect of a prolonged blockade.
The situation carries risks of further escalation. Analysts have highlighted potential upside for oil prices if tensions lead to additional supply outages or the closure of the Bab el-Mandeb Strait.
Energy companies have seen varied effects. Some, such as BP, reported sharply higher profits from elevated oil trading activities linked to the volatility.
As diplomatic efforts remain deadlocked and military posturing continues, traders are positioning for an extended period of tight supply. The coming weeks will be critical in determining whether the blockade eases or if further measures intensify the disruption to global energy flows.
With reporting by BBC, CNBC and OilPrice.

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