Oil Prices Surge Nearly 3% as Israel-Iran Conflict Escalates, U.S. Involvement Remains Uncertain
Oil prices rallied close to 3% on Thursday as the intensifying Israel-Iran conflict and lingering uncertainty over potential U.S. involvement rattled global markets.
Brent crude futures climbed $2.15, or 2.8%, to settle at $78.85 per barrel, marking their highest closing level since January 22. U.S. West Texas Intermediate (WTI) crude for July delivery rose $2.06, or 2.7%, to $77.20 by 13:30 EST (17:30 GMT).
With U.S. markets closed for a federal holiday, trading volumes were relatively light.
The geopolitical situation deteriorated further as Israel launched airstrikes on Iranian nuclear sites Thursday, while Iran responded with missile and drone attacks on Israel—just hours after hitting an Israeli hospital overnight.
Neither side appeared ready to de-escalate. Israeli Prime Minister Benjamin Netanyahu vowed that Iran’s leadership would “pay the full price,” while Tehran issued a warning against third-party interference in the conflict.
The White House confirmed that President Donald Trump will decide within two weeks whether the U.S. will join the conflict, a possibility that is keeping oil markets on edge.
“Market consensus is increasingly leaning toward some form of U.S. involvement,” said Rory Johnston, founder of the Commodity Context newsletter.
Iran, OPEC’s third-largest oil producer, pumps around 3.3 million barrels per day (bpd). With 18 to 21 million bpd of oil and refined products transiting through the nearby Strait of Hormuz, fears are mounting that the conflict could severely disrupt global energy supplies.
Should the conflict escalate further, especially with direct U.S. engagement, the risk of attacks on oil tankers and critical energy infrastructure would increase significantly, said Helima Croft of RBC Capital.
J.P. Morgan warned that in a worst-case scenario—where the conflict spreads and leads to a shutdown of the Strait of Hormuz—oil could spike to $120–$130 per barrel. Meanwhile, Goldman Sachs said a $10 geopolitical premium per barrel is justified, and Brent prices could rise above $90 if the risk of supply disruption expands.
Even if tensions ease in the short term, oil prices are unlikely to return to the low $60 range seen just a month ago, said Phil Flynn of the Price Futures Group. “This conflict has jolted oil out of its complacency,” he said. “The market has been underestimating geopolitical risk.”
However, DBRS Morningstar noted in a Thursday report that any sharp spike in prices is likely to be temporary. If hostilities recede, the war premium should fade, especially as higher oil prices could intensify existing economic headwinds caused by trade tariffs, ultimately dampening global demand.
Elsewhere, Russia signaled confidence in the market’s resilience. Russian Deputy Prime Minister Alexander Novak, speaking at the St. Petersburg Economic Forum, said OPEC+ should continue with plans to raise output, citing rising seasonal demand. He cautioned against alarming the market with overly aggressive projections.
