The global oil price hit $126 a barrel yesterday, its highest level since 2022, after US President Donald Trump said Washington’s blockade of Iranian ports could last for months as peace talks remained stalled.
After surging more than 13% in 24 hours, the price of Brent crude futures reached its highest price since the war began on 28 February. Not since Russia’s 2022 invasion of Ukraine has Brent topped $120, with the price then peaking at $139.
Oil markets have been spooked this week as Trump appeared willing to maintain the US Navy’s blockade of Iranian ports, with Iran responding by keeping the Strait of Hormuz all but shut to other oil tankers.
Market observers believe that traders are beginning to look beyond the early optimism that a diplomatic resolution could restore Gulf oil flows through the vital trade route, and towards “the reality of the supply situation.”
“The breakdown of talks between the US and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows,” Warren Patterson, the head of commodities strategy at the investment bank ING, said.
Oil later fell back from its four-year high, to about $114 a barrel yesterday afternoon.
Trump told oil executives this week that the US would “continue the current blockade for months if needed”, according to a White House official.
US officials hope the blockade will force Iran to cap its oil wells and shutter production once its oil facilities, such as Kharg Island, have filled to the brim.
“The blockade is somewhat more effective than the bombing,” Trump told Axios, a pro-US government news site. “They are choking like a stuffed pig.”
Iran Supreme Leader Issues Defiant Statement Over Strait Of Hormuz
Iran’s supreme leader Mojtaba Khamenei has broken his recent silence with a defiant statement hailing Iran’s control over shipping in the Strait of Hormuz and vowing to guard the country’s nuclear and missile programmes.
“Today, two months after the largest military deployment and aggression by the world’s bullies in the region, and the United States’ disgraceful defeat in its plans, a new chapter is unfolding for the Persian Gulf and the Strait of Hormuz,” Khamenei said in a statement read by a state television anchor.
The statement said Tehran would secure the Gulf region and eliminate what he described as “the enemy’s abuses of the waterway”, and that “new management of the Strait will bring comfort and progress for the benefit of all the nations of the region and economic blessings will bring joy to the hearts of the people.”
Iran has sought to extract a price for being attacked by exerting control over the Strait, the narrow waterway through which about one-fifth of global oil typically transits.
Speaking to mark Persian Gulf Day in Iran, Khamenei also vowed that Iran would “guard its modern technological capacities – from nano to bio to nuclear and missile – as their national capital and will guard it like their maritime, land and air borders”.
No recording or visual sighting of Khamenei has been broadcast since he was appointed Supreme Leader in early March.
Reports have suggested that he was severely injured in the bombing that killed his 86-year-old father and predecessor on 28 February. He is said to be in hospital being treated for injuries.
His new statement suggests Iran is determined to implement a new fees regime in the Strait that it will present as benefiting the entire region as a belated assertion of regional sovereignty, Western media stated.
“Foreigners who maliciously covet it [the Strait] from thousands of kilometres away have no place there except at the bottom of its waters,” Khamenei’s statement said.
The Strait’s closure has put pressure on Trump, as oil and petrol prices have rocketed before crucial midterm elections, as well as on his Gulf allies, which use the waterway to export their oil and gas.
Trump Revs War Machine
Meanwhile, Trump is tightening the noose on Iran and has summoned his top military commander to signal to Tehran that it’s time to make a deal.
CENTCOM Commander Admiral Brad Cooper was reportedly briefing Trump yesterday about military strategy, but experts told The New York Post there was a bigger message at play.
“It was a signal to Iran and a political trial balloon to the US,” a former administration official said.
That signal: Tehran should come to the table and make a peace deal or face more US military might.
The blockade on the Strait of Hormuz is in its third week and without its main waterway, Iran has had to store its crude oil instead of selling it, the paper noted.
And it’s running out of places to keep the 1.5 million to 2 million barrels of oil its wells produce daily. Shutting down production – and then starting it back up – would be an expensive proposition.
Huddling with Cooper – who also briefed Trump two days before the strikes on Iran originally began on 28 February – sends a powerful signal to Tehran.
“The economic pressure is the US main effort but if Iranians don’t agree to his terms as a result of that pressure, he has Admiral Cooper on deck,” Joel Rayburn, a Senior Fellow at the Hudson Institute who served as Special Envoy for Syria during Trump’s first term, said of the President’s strategy.
Trump gave a hint at his strategy when he spoke to reporters in the Oval Office ahead of his briefing with the aydmiral, as reported by Fox News.
And by publicly revealing the meeting, Trump could send another message to Tehran that the US can and will strike back.
“If you’re going to make the economic pressure work you also have to show you have a credible military option,” Rayburn noted.
Beyond the status quo of keeping up the blockade while Iran holds its grip on the Strait of Hormuz, Trump could resume combat operations to finish what was started — in about two weeks or less — and include using force to secure and open the Strait.
Trump could also destroy Kharg Island, the strategically significant Persian Gulf island that serves as the terminal for nearly all of Iran’s oil exports.
Ending Iran’s oil distribution could cripple its economy even further and force the regime to come to the table, the former official said.
