Oil Prices Rise Again After Trump Threatens to Take Out Iran

Global oil markets experienced renewed volatility on Monday as President Trump escalated threats against Iran, pushing US crude above USD 114 per barrel in early afternoon trading in New York. The price movements came after an earlier decline triggered by reports of potential ceasefire negotiations brokered by Pakistan.

The sharp reversal in market sentiment followed a press conference in which Trump suggested potentially imminent military strikes on Iran, effectively eroding hopes for a diplomatic resolution to the Middle East conflict. Fears that military action would further delay the restoration of energy flows through the Strait of Hormuz drove the commodity higher, despite initial optimism surrounding peace talks.

Stock markets showed resilience amid the geopolitical uncertainty, with European and some Asian exchanges closed for holidays, including London. The S&P 500 rose 0.4 per cent to 6,611.83 by the close in New York, whilst the Nasdaq advanced 0.5 per cent to 21,996.34 and the Dow Jones industrial average gained 0.4 per cent to 46,669.88. In Japan, the Nikkei rallied for a third consecutive session, finishing up 0.55 per cent at 53,413.68.

The escalation in rhetoric follows Trump’s weekend threats to target Iranian power plants and bridges unless Tehran reopens the Strait of Hormuz by Tuesday. Iran has effectively blocked the narrow waterway, through which approximately one-fifth of global oil and liquefied natural gas is shipped, in retaliation for US-Israeli strikes that commenced on 28 February.

Markets initially responded positively to reports that both Washington and Tehran were considering a Pakistani-brokered ceasefire plan. However, Iran subsequently rejected the US proposal, issuing its own ten-point response via Pakistan, according to state news agencies. The diplomatic impasse has reinforced concerns about prolonged supply disruption in global energy markets.

The International Energy Agency has characterised the current situation as the largest supply disruption in the history of the global oil market. Brent futures approached USD 120 per barrel last month following attacks on key energy assets across the region. Some commodity analysts have issued forecasts as high as USD 200 per barrel for 2025, warning of an energy crisis potentially exceeding the severity of the 1970s oil shocks.

The Opec+ group of producers, which includes Russia, warned over the weekend that damage to regional energy infrastructure would impact supply beyond the conclusion of hostilities with Iran. The consortium agreed to a modest production increase of 206,000 barrels per day for May, although actual supply remains constrained by disruption after five weeks of conflict.

Saudi Arabia has raised the price of its main oil grade to Asia for the coming month to a record premium, albeit lower than market expectations had anticipated. Meanwhile, traffic through the Strait of Hormuz has increased to its highest flow since the onset of the war, with Iran granting exemptions to vessels from certain neighbouring countries, such as Iraq.

The immediate impact of the supply disruption has been partially cushioned by oil already in transit and the largest emergency stock release by International Energy Agency members on record. Analysts have cautioned, however, that a supply chain breakdown is imminent if the disruption persists beyond several more weeks. The warning underscores the fragility of global energy markets and the critical importance of the Strait of Hormuz to international oil flows.