Global oil prices surged by more than five per cent on Wednesday after United States President, Donald Trump, declared that the ceasefire with Iran had collapsed, raising fresh fears of a wider conflict in the Middle East and possible disruptions to global crude supplies.
The renewed escalation sent shockwaves through the energy market, with investors reacting to fresh military exchanges between the United States and Iran, as well as growing uncertainty over the security of shipping through the strategic Strait of Hormuz.
International benchmark Brent North Sea crude climbed 5.3 per cent to $78.09 per barrel, while the U.S. benchmark, West Texas Intermediate (WTI), rose 5.4 per cent to $74.23 per barrel, extending gains recorded a day earlier.
The sharp rally followed Trump’s announcement that the ceasefire with Iran was over after fresh strikes in the region.
The United States has launched extensive strikes on Iran following attacks on ships in the Strait of Hormuz, prompting retaliatory attacks on American military bases in the Gulf.
The latest escalation has heightened concerns over the future of peace efforts between Washington and Tehran and the reopening of the Strait of Hormuz, one of the world’s most important oil shipping routes through which a significant share of global crude exports passes.
The geopolitical tensions also weighed on Asian markets, with Seoul extending losses amid concerns over technology stock valuations and uncertainty over when companies will begin generating substantial returns from massive investments in artificial intelligence.
U.S. and Iranian forces reported striking dozens of targets, further straining an interim agreement aimed at ending the Middle East conflict. Washington also revoked a temporary sanctions waiver that had allowed limited transactions involving Iranian oil.
According to the U.S. military, the latest strikes targeted Iranian military facilities in retaliation for attacks on three commercial vessels in the Strait of Hormuz.
Iranian state media reported multiple explosions around the strategic waterway, while the country’s Revolutionary Guards claimed responsibility for strikes on dozens of U.S. military facilities in Bahrain and Kuwait.
The three commercial ships were attacked near Oman, which had proposed a temporary shipping corridor along its coastline. Tehran opposed the proposal as it continues to push for the collection of fees from vessels using the strait.
Iran’s Foreign Ministry accused the United States of repeatedly violating a memorandum of understanding reached between both countries.
Wednesday’s gains came after both Brent and WTI had already risen by more than two per cent on Tuesday, pushing crude prices to their highest levels in two weeks.
Commenting on the situation, Andreas Krieg, a security expert at King’s College London, said Iran appeared determined to insist on charging fees for the use of the Strait of Hormuz despite strong opposition from Washington.
“We are now in a sensitive period where potential alternatives to an Iranian toll or fee system are being explored,” Krieg told AFP.
“Iran is sending a clear signal that no alternative will be accepted.”
