Oil Prices Surge Toward $100 as Strait of Hormuz Closure Raises Supply Fears
Oil prices climbed sharply on Thursday, approaching the $100 per barrel mark, after Iran’s new leader Mojtaba Khamenei warned that the critical Strait of Hormuz would remain closed amid the ongoing U.S. and Israeli military campaign against Iran.
Brent crude, the global oil benchmark, rose 8% to $99.34 per barrel by 12:57 ET (16:57 GMT) after earlier reaching a session high of $101.57. Meanwhile, U.S. West Texas Intermediate (WTI) crude surged 8.6% to $94.77 per barrel.
Market analysts say geopolitical tensions are continuing to drive strong price movements in energy markets.
Geopolitical Tensions Add Risk Premium to Oil Markets
Laurence Booth, global head of markets at CMC Markets, said the evolving conflict is keeping a significant geopolitical risk premium embedded in oil prices.
The rise in crude prices reflects growing concerns that the conflict could lead to long-term disruptions in global oil supply, particularly if shipping routes remain restricted.
Oil Tanker Attacks Raise Supply Disruption Concerns
Concerns intensified after reports emerged that two oil tankers were attacked near Iraq and Kuwait. Video footage circulating online showed the vessels engulfed in flames, with Iraqi media attributing the strikes to Iran.
Farhan al-Fartousi, director of Iraq’s General Company for Ports, told The Wall Street Journal that one sailor had been killed and that rescue teams were evacuating crew members from the burning ships.
He also said Iraq temporarily shut down all its oil ports, while fuel leaks from the damaged tankers spilled into the sea.
In a separate incident, the United Kingdom Maritime Trade Operations agency reported that a third vessel was struck by an unknown projectile near Dubai.
Following the attacks, Oman and Iraq reportedly closed several oil terminals, further raising concerns about supply disruptions.
China Restricts Fuel Exports Amid Energy Supply Risks
In another development, China reportedly halted exports of refined fuel in March in an effort to prevent a potential domestic fuel shortage linked to the Iran conflict.
The move highlights the global impact of the Middle East crisis, which is affecting energy markets well beyond the region.
Strait of Hormuz Remains Closed
Iran’s leader Mojtaba Khamenei also declared that the Strait of Hormuz would remain closed, warning that Iran would continue to retaliate against its enemies.
Khamenei recently assumed power following the death of his father, former Iranian leader Ali Khamenei, who was killed during the initial phase of U.S. and Israeli strikes against Iran in late February.
The Strait of Hormuz, located south of Iran, is one of the world’s most important energy shipping routes. Roughly 20% of global oil and liquefied natural gas supplies pass through the narrow waterway.
Due to the rising security risks and difficulties securing maritime insurance, many shipping companies have suspended operations through the strait.
Strategic Oil Releases Provide Limited Relief
Oil markets received only limited relief after the International Energy Agency (IEA) announced plans to release record volumes of strategic oil reserves to stabilize markets.
Earlier this week, Brent crude briefly surged close to $120 per barrel before retreating slightly.
IEA Warns of Historic Global Oil Supply Disruption
In a report released Thursday, the IEA warned that the conflict in the Middle East is causing the largest disruption in the history of the global oil market.
According to the agency, oil flows through the Strait of Hormuz have dropped to a “trickle”, down from roughly 20 million barrels per day before the conflict began.
With storage capacity filling up and limited alternative transport routes available, major oil-producing countries in the Gulf region have already been forced to cut production by at least 10 million barrels per day.
The IEA warned that supply losses could increase further if shipping activity does not resume soon.
Global oil supply is now expected to decline by around 8 million barrels per day in March, although higher production from Russia, Kazakhstan and other non-OPEC+ producers may partially offset the losses.
Strategic Reserve Releases Expand
The IEA confirmed it will release 400 million barrels of oil from global strategic reserves, the largest coordinated release on record.
At the same time, President Donald Trump announced that the United States will release 172 million barrels from its emergency petroleum reserves to help stabilize markets.
Data released Wednesday also showed U.S. crude oil inventories increased by 3.8 million barrels last week, exceeding market expectations.
U.S. Economy Less Sensitive to Energy Price Shocks
Despite the sharp rise in oil prices, economists say the U.S. economy is less vulnerable to energy price shocks than in previous decades.
A report from Wells Fargo indicates that higher oil prices are more likely to slow consumer spending growth rather than trigger a major economic downturn.
According to the bank’s model estimates, a 50% increase in oil prices would reduce annual real personal consumption expenditure (PCE) growth by about one percentage point.
In contrast, similar price increases in the 1980s would have reduced consumption growth by roughly two percentage points, significantly increasing recession risks.
Wells Fargo economist Tom Porcelli said the U.S. economy has become more resilient thanks to improved energy efficiency, reduced dependence on imported oil, and the country’s transition into a net energy exporter.
These structural changes have helped reduce the overall economic impact of oil and gas price shocks.
