Oil prices surged more than $1 on Thursday as Iran declared the Strait of Hormuz, a critical energy chokepoint, closed following additional US strikes against Iran. President Donald Trump vowed further attacks if no peace deal is reached.
Market Movements
Brent futures rose $1.48, or 1.59 percent, to $94.58 a barrel as of 05:43 a.m. Saudi time. US West Texas Intermediate crude climbed $1.71, or 1.90 percent, to $91.74. Earlier in the session, US crude futures gained more than $3.
Iran's Announcement
Iran’s top joint military command announced the closure of the Strait of Hormuz on Thursday, including oil tankers and commercial ships, warning that any vessel attempting passage will be shot at. This move has heightened fears of severe supply disruptions.
“It once again suggests a deal is still some way off and that energy flows from the Persian Gulf will remain heavily constrained,” said ING analysts in a note to clients. The renewed escalation in fighting prompted oil prices to rally in early morning trading, they added.
US Military Response
On Wednesday, the US military stated on X that commercial ships continue to transit in and out of the strait. It also confirmed that no US warships have been struck in the strait, after Iran’s state media reported US ships near the waterway were targeted by missiles and drones.
US forces began launching additional strikes against multiple targets in Iran at 12:15 a.m., the latest in an escalating exchange of attacks that threaten to reignite a full-scale war. The conflict was paused in early April when the two sides agreed to a fragile ceasefire.
Trump told Fox News reporter Trey Yingst on Wednesday evening that the strikes would stop shortly but that he would “bomb the shit out of them” if Iran’s leaders did not sign an agreement with the US immediately.
Impact on Oil Supplies
Iran’s months-long blockade of the strait, which normally carries a fifth of global oil and gas shipments, has kept oil prices elevated. US crude inventories fell by 7.2 million barrels to 426.5 million barrels in the week ended June 5, the EIA said on Wednesday, compared with analysts’ expectations for a 4 million-barrel draw.
US crude inventories, including those from strategic reserves, have fallen by 79 million barrels since the Iran war began on Feb. 28, as the top global producer moved to plug supply gaps after the strait was effectively shut.
Underscoring the squeeze, OPEC output in May slid to its lowest level in over two decades, a Reuters survey showed, as a US naval blockade curbed Iran's exports and Tehran’s effective closure of the strategic waterway slashed shipments from other Gulf producers.
