Oil Rallies as U.S.-Iran Hormuz Clash Threatens Ceasefire
Oil prices surged Friday after U.S. and Iranian forces exchanged fire in the Strait of Hormuz, CNBC reported, reigniting fears that a fragile ceasefire between Washington and Tehran was fracturing.
International benchmark Brent crude for July delivery climbed 1.20% to $101.26 per barrel. U.S. West Texas Intermediate for June delivery gained 0.88%, settling near $95.64.
A Disputed Exchange in Critical Waters
Both Washington and Tehran blamed the other for initiating the confrontation in the Strait of Hormuz, one of the world’s most strategically vital oil shipping corridors. The incident added fresh strain to a ceasefire already undermined by repeated violation allegations from both sides.
President Donald Trump later addressed the clash during a call with an ABC News reporter. He insisted the ceasefire remained intact, characterising the exchange as minor. On Truth Social, Trump said U.S. forces had destroyed the Iranian assets involved, including small boats and drones. He added a stark warning that Iran would face further military action if it did not reach a nuclear agreement with Washington.
Naval Escorts and a Mission Paused
Market optimism briefly built around hopes that the Strait of Hormuz could reopen to normal commercial traffic. That sentiment reversed sharply when reports emerged that Washington was preparing to resume naval escorts for commercial vessels through the waterway. Trump subsequently paused “Operation Freedom,” the naval mission designed to shepherd commercial ships through the strait.
ANZ Research described the price action as a “rollercoaster rise,” noting that doubts over U.S.-Iran peace negotiations were driving sharp swings. The bank’s analysts warned that the risk of a proposed peace deal collapsing would keep oil markets in a volatile state.
Background: A Route the Market Cannot Ignore
The Strait of Hormuz handles roughly 20% of global oil trade, making any military friction there immediately consequential for energy prices. Tensions between the U.S. and Iran have periodically threatened that corridor for years. Iran was also reportedly reviewing a fresh U.S. proposal to resolve the broader conflict at the time of the fire exchange, adding complexity to an already delicate diplomatic moment.
What Analysts Expect Next
Citi analysts said broader financial markets were likely to stabilise despite the ongoing volatility tied to Middle East developments. However, the bank cautioned that the path toward normalization would not be straightforward. Elevated oil prices, analysts warned, could persist for several months as negotiations remained unresolved.
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