Oil prices surged on Thursday, with Brent crude climbing to its highest level in four years as investors worried that escalating tensions between the United States and Iran could trigger a prolonged disruption to Middle Eastern supply and weigh on global economic growth.
Brent crude futures rose $4.28, or 3.63%, to $122.31 a barrel by 06:59 GMT, after earlier reaching an intraday peak of $126.41 — the highest since March 9, 2022. The June contract, which has now gained for nine consecutive sessions, is set to expire later Thursday. The more actively traded July contract increased $2.05, or 1.86%, to $112.49.
U.S. West Texas Intermediate futures advanced $1.46, or 1.37%, to $108.34 a barrel, marking their highest level since April 7 and extending roughly 7% gains from the previous session.
Strong yearly rally continues
Brent has more than doubled so far this year, while WTI has climbed close to 90%. Both benchmarks are heading for a fourth straight month of gains, reflecting ongoing fears that the Iran conflict could restrict global oil flows for an extended period, adding to inflationary pressures and raising recession risks.
Geopolitical tensions drive the surge
A report from Axios said Donald Trump is scheduled to receive a briefing on potential new military strikes against Iran, aimed at pushing Tehran back into negotiations over its nuclear program.
The conflict, which began on February 28 with U.S. and Israeli air strikes, prompted Iran to shut down most shipping through the Strait of Hormuz — a vital artery for global energy supplies. While a ceasefire has paused active fighting, the United States has imposed a blockade on Iranian ports.
Diplomatic efforts remain stalled, with Washington insisting on addressing Iran’s alleged nuclear ambitions, while Tehran is demanding control over the strait and compensation for war-related damage.
Analysts warn of prolonged supply disruption
“Prospects for any near-term resolution to the Iran conflict or a reopening of the Strait of Hormuz remain dim,” IG market analyst Tony Sycamore said in a note.
Concerns about extended disruption intensified after Trump held talks with oil companies on Wednesday about mitigating the effects of a potential long-lasting blockade, according to a White House official.
“In the near term, market participants remain focused on the dynamics of the U.S.-Iran conflict and the risk of a prolonged closure of the Strait of Hormuz,” said OANDA senior market analyst Kelvin Wong.
“This focus currently outweighs the long-term implications of the potential waning influence of OPEC+ following the UAE’s (United Arab Emirates) exit from the cartel.”
OPEC+ outlook adds to uncertainty
Sources told Reuters that the OPEC+ alliance is expected to agree to a modest increase of around 188,000 barrels per day in production quotas at its upcoming meeting.
The move comes shortly after the UAE’s exit from OPEC, effective May 1, which is likely to weaken the group’s grip on supply management. Although the UAE could boost output once exports resume, analysts say the impact on the market this year should be limited given ongoing disruptions linked to the conflict and the continued closure of Hormuz.
Demand destruction seen as key balancing force
With supply constraints persisting, analysts increasingly see demand destruction as the main mechanism to rebalance the market.
ING estimates that around 1.6 million barrels per day of demand could be lost as high prices force consumers and businesses to scale back usage.
While meaningful, “it’s clearly not enough to fill the supply gap we are currently facing,” the analysts said in a note.
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