Oil Rallies After U.S.-Iran Fire Exchange Threatens Strait of Hormuz Ceasefire
Oil prices resumed their climb early Friday after CNBC reported that the United States and Iran exchanged fire in the Strait of Hormuz, stoking fears the fragile Strait of Hormuz ceasefire between the two nations was breaking apart.
Crude Benchmarks Jump on Fresh Conflict Signals
International benchmark Brent crude for July delivery gained 1.20% to reach $101.26 per barrel. U.S. West Texas Intermediate for June delivery rose 0.88% to $95.64. Both moves extended a rally that had briefly stalled amid cautious optimism over diplomatic talks.
Both Washington and Tehran blamed the other for initiating the exchange, deepening an already strained truce. The incident landed as Iran was reportedly weighing a U.S. proposal to bring the broader conflict to a close.
President Donald Trump later insisted the ceasefire remained intact, describing the exchange to an ABC News reporter as a minor incident. In a separate Truth Social post, Trump said U.S. forces had neutralized the Iranian assets involved, including small vessels and drones, and warned Tehran that further military action would follow if it rejected a nuclear agreement.
Background: A Waterway the World Cannot Afford to Lose
The Strait of Hormuz is one of the most consequential chokepoints for global energy supply. Roughly 20% of the world’s traded oil passes through the narrow passage between Iran and Oman. Any sustained disruption there sends immediate shockwaves through commodity markets worldwide.
Earlier this week, traders had grown cautiously optimistic after signals that the waterway might reopen to normal commercial traffic. That sentiment reversed sharply when reports emerged that Washington was preparing to reinstate naval escorts for commercial vessels, a mission dubbed Operation Freedom. Trump subsequently paused the operation, adding another layer of uncertainty.
Also Read: What the Strait of Hormuz Means for Global Energy Markets
Analysts Warn of Prolonged Volatility
ANZ Research characterized the week’s price moves as a rollercoaster, noting that doubts surrounding U.S.-Iran peace negotiations were the primary driver. The bank cautioned that any breakdown in proposed talks would keep oil markets unsettled. Analysts at Citi took a slightly broader view, suggesting wider financial markets could stabilize over time. However, Citi flagged that the road toward normalization remained uneven and could sustain elevated oil prices through the coming months.
With nuclear negotiations still unresolved and military incidents continuing to flare, traders appear unwilling to price in any durable peace premium just yet.
Also Read: ANZ Research: Middle East Risk and Commodity Pricing
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