Oil surges to five-week high as U.S.-Iran strikes threaten Hormuz flows

Brent crude surged above $95 per barrel on Wednesday, briefly touching $97.04 — its highest level since July 24 — as renewed military exchanges between the United States and Iran intensified fears of prolonged disruptions to energy flows through the Strait of Hormuz.bloomberg+1

West Texas Intermediate also climbed to a session high of $92.29 before pulling back, after surging 5.2% on Tuesday to settle at $90.22. The rally marks a third consecutive day of gains for both benchmarks, driven by what analysts describe as a market caught between the risk of escalation and the fading prospect of a diplomatic resolution.rigzone

Renewed Hostilities Rattle Markets

The latest price spike followed the most significant exchange of fire between Washington and Tehran in weeks. U.S. forces struck Islamic Revolutionary Guard Corps targets on Iran's Larak Island, which Washington said were launchers firing mines into the Strait of Hormuz. Iran retaliated with ballistic missile and drone attacks on U.S.-linked targets in Jordan and the UAE.fxstreet+2

President Donald Trump warned that any Iranian response could trigger a "much stronger military action," telling Fox News ↗ 1.70% that Iran could be "totally wiped out". Iran's IRGC warned of "severe punishment" and said the U.S. attacks would further restrict traffic through the strait.rigzone+1

Two oil supertankers were struck by projectiles while attempting to exit the Strait of Hormuz on Monday, compounding supply fears. Preliminary data from Kpler showed only five commodity vessels crossed the waterway that day, compared with a 10-day average of about 14, with no liquid tankers among them.tribuneonlineng+1

Analysts Warn of $100 Oil

"The market is facing a binary risk," said Saxo Bank head of commodity strategy Ole Hansen. "An announcement that a deal has been reached could send prices tumbling, while any escalation would further undermine the prospect of a peace deal. That's why oil remains highly volatile, with a potential $5 move in either direction on fresh developments."profit.pakistantoday

Tim Waterer, chief market analyst at KCM, warned that "a return toward $100 oil cannot be ruled out if the current escalatory phase continues". Strategists at TD Securities noted the flare-up highlights "how flimsy any deal or MoU headlines really are".fxstreet+1

U.S. Secretary of Energy Chris Wright offered a counterpoint on Tuesday, saying 17 million barrels of oil transited the Strait of Hormuz on Monday — the highest level since the conflict began reducing flows. Treasury Secretary Scott Bessent dismissed the strait's importance, saying it would soon be bypassed by pipelines and rendered a "worthless piece of water".rigzone+1

Broader Supply Pressures Persist

Beyond the geopolitical turmoil, the oil market faces structural tightness. OPEC+ members have maintained production cuts, U.S. shale output remains below pre-pandemic levels, and Russia extended its diesel export ban through September 30. OPEC recently cut its forecast for global oil demand growth to 1.14 million barrels per day this year, 70,000 bpd less than previously expected.timesofoman+1

Bloomberg Intelligence analysts Salih Yilmaz and Will Hares wrote that adaptation to Hormuz disruptions — including dark flows and bypass routes — has helped keep Brent below $100, but "renewed US-Iran hostilities underscore the risk that further disruption could quickly push an already constrained market into a much tighter balance".rigzone