The price surge followed mutual threats of economic warfare, a missile attack on U.S. warships, and strikes on refinery infrastructure.
Crude oil markets ticked up closer to $100 per barrel as the diplomatic optimism that triggered steep losses earlier in the week dissolved into renewed conflict and retaliatory threats between the United States and Iran. International benchmark Brent crude traded at $97.66 per barrel, while West Texas Intermediate stood at $93.05 per barrel. The upward pressure on energy prices was compounded by fresh security threats across vital shipping lanes and energy installations.
Escalating Threats and the Strait of Hormuz Chokepoint
The latest market volatility stems from a sharp deterioration in diplomatic talks. Tehran issued a direct warning of economic warfare to the United States and announced it had fired a new, advanced missile at U.S. warships. At the same time, regional forces carried out a strike on Saudi Arabia’s Jizan refinery, a key facility with a daily processing capacity of 400,000 barrels of crude.
Compounding supply anxieties, Iran declared plans to establish a new shipping corridor in the Strait of Hormuz, raising fears that commercial tanker traffic through the critical waterway will face severe operational hurdles. Before the conflict disrupted maritime trade, the Strait of Hormuz carried roughly one-fifth of global oil and liquefied natural gas supplies.
“In recent days, Washington has received a clear warning from Iran’s new missiles. Economic warfare will be met by a maritime exclusion zone across the Persian Gulf to the blockade perimeter. The operational posture toward U.S. warships and bases has been fundamentally recalibrated.”
Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, via Oilprice
Shipping data underscores the severity of the maritime squeeze. Preliminary figures cited from Kpler showed only five commodity vessels crossed the strait on Tuesday, a stark drop compared to the 10-day moving average of 15.
Shifting Market Sentiments and Volatile Trading Sessions
Energy markets have swung dramatically in recent days, caught between fleeting diplomatic breakthroughs and sudden military flare-ups. Earlier in the week, prices suffered steep declines—slumping more than 7 percent in a single session—on reports that Washington and Tehran were nearing a ceasefire agreement and discussing a gradual reopening of navigation channels.
Financial analysts note that speculative positioning has shifted rapidly in response to the headlines. ING analysts reported that speculators increased their net long positions in Brent crude as the immediate prospect of a lasting peace evaporated.
“From a broader perspective, oil markets have remained stuck between diplomacy and disruption for more than two months, with investors’ emotions being manipulated by headlines almost daily.”
Priyanka Sachdeva, senior market analyst at Phillip Nova, via auto.economictimes.indiatimes.com
Market participants are also monitoring broader macroeconomic ripple effects. In Indonesia, the rupiah strengthened to Rp17,695 per US dollar during a mid-week trading session, supported temporarily by the brief dip in global crude prices before renewed geopolitical tensions took hold.
Long-Term Outlook and Price Projections
As diplomatic channels face strain, industry experts are recalibrating supply recovery timelines. ANZ analyst Daniel Hynes projected that energy markets will not see normalized conditions soon, stating that pre-war throughput is unlikely to fully return until late Q1 or early Q2 2027.
Financial institutions have modeled various scenarios should the shipping chokepoint remain constrained. Citigroup cautioned that if waterway disruptions persist for another month, total losses could rise to about 1.3 billion barrels, driving prices toward $110 per barrel.
“If a formal deal eventually materialises, oil prices could witness a free fall as geopolitical premiums rapidly evaporate from the market. However, any fresh signs of attacks on oil infrastructure or escalation in the Middle East could easily trigger another parabolic spike in crude prices.”
Priyanka Sachdeva, senior market analyst at Phillip Nova, via auto.economictimes.indiatimes.com
Traders now look toward upcoming international summits and scheduled negotiations to determine whether the fragile ceasefire frameworks can survive or if energy markets will face sustained upward pressure through the remainder of the year.
