On Thursday, global oil prices surged to a four-year peak above $126 per barrel, driven by mounting fears that escalating military conflict between the United States and Iran could trigger prolonged disruptions to critical energy supplies from the Middle East. The sharp intraday rally later gave way to an unexpected retreat, capping a session marked by historic levels of volatility that shook global commodity and financial markets.
The upward momentum gained traction after Axios reported Wednesday that U.S. President Donald Trump was set to receive a briefing Thursday on potential military strikes targeting Iran, with the stated goal of forcing Tehran back to negotiations over its nuclear program. Attendees expected at the briefing included Defense Secretary Pete Hegseth and Joint Chiefs of Staff Chair General Dan Caine.
Since the start of joint U.S. and Israeli military strikes against Iran on February 28, Brent crude prices have already doubled, while U.S. West Texas Intermediate (WTI) has climbed nearly 90%. The massive gains stem primarily from the effective closure of the Strait of Hormuz, the strategic maritime chokepoint that handles roughly one-fifth of the world’s daily oil and liquefied natural gas exports.
Sustained elevated oil prices carry severe risks for the global economy, threatening to ignite a new inflationary spiral and push up fuel prices across the United States. The timing is particularly sensitive for the U.S., as it heads into midterm elections later this year. Oil, natural gas, and their refined products are foundational inputs for global transportation, energy distribution, and manufacturing sectors ranging from plastics to agricultural fertilizers.
John Evans, an analyst at leading oil trading firm PVM, warned that market participants unprepared for even steeper gains should prepare for further shocks. “Anyone who does not believe Brent can reach $150 per barrel would be wise to look away now,” he said.
During Thursday’s trading session, June-delivery Brent futures hit an intraday peak of $126.41 per barrel, the highest level recorded since March 9, 2022. By the closing bell, however, the benchmark had erased all intraday gains and more, settling $4.14, or 3.5%, lower at $113.89 per barrel. More actively traded July contracts fell 1.6%. WTI futures also pulled back from an early high of $110.93 per barrel – the strongest since early April – to close 2.1% lower at $104.60.
Even with Thursday’s retreat, both major crude benchmarks remain on track to post their fourth consecutive monthly gain, reflecting widespread market anxiety that the ongoing conflict around Iran will disrupt global energy supplies for an extended period.
Market analysts have not identified a clear fundamental trigger for the late-day price pullback from the session’s highs. Instead, they attribute the sharp reversal to the extreme volatility that has gripped energy markets since the conflict began. Two large sell orders executed during morning trading coincided with approaching futures contract expiration dates, a period that typically amplifies price swings.
Ole Hvalbye, a senior analyst at SEB Research, described the day’s price movements as unprecedented. “We are seeing massive intraday swings that are comparable to what we normally see over entire months,” he said, adding that current market conditions amount to “chaos” that make it extremely difficult to build a coherent fundamental market outlook.
Beyond commodity markets, the volatility spilled over into foreign exchange: the Japanese yen rose 3% on Thursday, its strongest single-day gain in more than three years, after Japanese officials issued warnings about potential currency intervention to support the yen, even in energy-related markets.
While President Trump announced a ceasefire in the conflict earlier this month, he simultaneously imposed a full blockade on Iranian ports. Negotiations to resolve the standoff have since stalled: the U.S. demands Iran open its nuclear program for new negotiations, while Iran demands concessions on control of the Strait of Hormuz and war reparations. Tony Sycamore, a market analyst at IG Markets, said there is little reason to expect a quick resolution or a near-term reopening of the strait.
Shipping data confirms that traffic through the critical waterway remains at a fraction of normal levels. Over a 24-hour period this week, only seven vessels passed through the strait, compared to a typical daily volume of 125 to 140 ships. Of the seven vessels that transited, three were bulk carriers, one was a container ship, and two were bitumen tankers, according to data from Kpler and satellite analysis from SynMax.
The effective closure of Hormuz has overshadowed another recent development in global oil markets: the United Arab Emirates’ announcement earlier this week that it will leave OPEC after nearly 60 years of membership. Analysts note the departure will allow the UAE to ramp up its own production once global export channels normalize, but they expect little immediate impact on current market conditions.
High prices have already begun to erode global oil demand, a dynamic that analysts say is the only factor currently easing some of the extreme tightness in supply. Analysts at ING estimate that global demand has fallen by roughly 1.6 million barrels per day, as consumers and end-users cut back on oil product consumption amid elevated costs. Even this demand destruction, however, has not been large enough to offset the massive gap left by disrupted supplies from the Middle East.