[Editor’s Note: Follow the media live blog for the latest regional developments with the US-Israel-Iran ceasefire now in effect.]
Oil prices surged sharply on renewed fears of prolonged supply disruption after US President Donald Trump described Iran’s response to American proposals aimed at ending the conflict as “totally unacceptable,” raising concerns that tensions around the Strait of Hormuz could intensify further.
Brent crude, the benchmark for two-thirds of the world’s oil, climbed 4.1 per cent to $105.50 a barrel in Asian trading, while US West Texas Intermediate crude rose 4.4 per cent to $99.80 a barrel as investors rushed back into energy markets amid fears of a prolonged regional crisis.
The gains extended oil’s volatile rally since the outbreak of the Iran conflict on February 28, with Brent now trading firmly above the psychologically important $100 level despite a fragile ceasefire announced on April 8.
Market sentiment deteriorated after reports that Tehran, through Pakistani mediators, demanded an immediate halt to hostilities and guarantees against future US-Israeli strikes as conditions for any settlement, according to Iran’s semi-official Tasnim news agency.
Analysts said Trump’s dismissal of Iran’s response has sharply reduced expectations of a near-term diplomatic breakthrough and reignited fears over the security of the Strait of Hormuz, the world’s most critical oil transit chokepoint.
Roughly 20 per cent of global oil and liquefied natural gas shipments pass through the narrow waterway linking the Gulf to international markets. Since the conflict escalated, shipping traffic through the strait has fallen sharply after Tehran warned it could target vessels attempting to cross the corridor.
“The market is pricing in the possibility that Hormuz disruptions may last longer than previously expected,” said analysts at Rystad Energy. “Even partial restrictions on tanker traffic can have an outsized impact because spare global supply capacity outside the Gulf remains limited.”
According to the International Energy Agency, about 21 million barrels per day of crude oil, condensates and petroleum products normally move through the Strait of Hormuz, making it one of the world’s most strategically sensitive energy routes.
Shipping insurers have also sharply increased war-risk premiums for vessels operating in Gulf waters, while several tanker operators have either suspended voyages or rerouted ships around Africa, adding significant costs and delays to global supply chains.
Analysts at JP Morgan warned that oil prices could spike toward $120 to $130 a barrel if the Hormuz disruption persists for several more weeks, especially if physical shortages begin emerging in Asian markets heavily dependent on Gulf crude supplies.
“Oil markets remain extremely vulnerable to geopolitical shocks because inventories are not sufficiently high to absorb prolonged supply interruptions,” the bank said in a recent note.
The latest price rally has boosted shares of major oil and gas producers globally, with energy companies expected to report windfall earnings if crude prices remain elevated through the second quarter.
However, economists cautioned that sustained triple-digit oil prices could intensify inflationary pressures globally and slow economic growth, particularly in large energy-importing economies across Asia and Europe.
Goldman Sachs analysts said every sustained $10 increase in crude prices could add around 0.2 percentage points to global inflation, complicating central bank efforts to ease interest rates.
Despite the market turbulence, Gulf producers led by the Organisation of the Petroleum Exporting Countries and key allies continue to monitor the situation closely, although analysts say replacing disrupted Gulf exports on a large scale would remain difficult even with emergency reserves.
Industry experts said the crisis is increasingly exposing structural vulnerabilities in global energy supply chains and could accelerate long-term efforts by consuming nations to diversify energy sources and strategic shipping routes.
However, for now traders remain focused on diplomatic developments and the security situation around Hormuz, where even limited escalation could trigger another sharp spike in oil prices and further unsettle global financial markets.
- Iran Israel war
