Global oil prices surged Thursday, settling at $100.46 per barrel – the highest level since August 2022 – as the effective closure of the Strait of Hormuz continued to disrupt markets and fuel fears of a wider economic crisis. The benchmark Brent crude rose 9.22% during the trading day, while U.S. Crude oil prices jumped 9.72% to $95.73 per barrel.
The price increases followed a statement attributed to Iran’s new supreme leader, Mojtaba Khamenei, broadcast on Iranian state television. Khamenei warned that the Strait of Hormuz would remain closed as a “tool of pressure” and threatened attacks on U.S. Bases in the region unless they were shut down, according to CNN reporting.
The Strait of Hormuz, a critical waterway through which approximately 20% of the world’s oil consumption flows, has been largely impassable since the outbreak of hostilities between Iran and the United States, and Israel. Commercial ships have reportedly come under fire from drones, exacerbating concerns about supply disruptions.
The current crisis began with joint U.S. And Israeli airstrikes targeting Iran, culminating in the death of Ayatollah Ali Khamenei, the previous supreme leader. His son, Mojtaba Khamenei, succeeded him and is viewed by U.S. Officials as an equally hard-line figure with strong ties to the Islamic Revolutionary Guard Corps, NBC News reported. Despite the sustained aerial bombardment, the Iranian regime remains intact, with no immediate signs of internal division or opposition.
The scale of the current oil shock is unprecedented, according to a report by Vox. Energy traders have long feared a disruption to oil flow through the Strait of Hormuz, but the scenario was previously considered a “tail risk” – a low-probability, high-impact event. The closure of the strait, coupled with throttled production from Gulf state producers who lack alternative export routes, has created a significant supply crunch.
U.S. Stock markets reacted negatively to the escalating tensions, with the Dow Jones Industrial Average falling 739 points, or 1.56%, and the S&P 500 and Nasdaq Composite dropping 1.52% and 1.78% respectively. The declines extended a recent period of market volatility, reflecting investor anxieties about rising energy costs and the potential for a global economic slowdown.
The White House had anticipated that the elimination of key Iranian leadership would quickly destabilize the ruling apparatus in Tehran, but the succession of Mojtaba Khamenei has maintained continuity within the regime, NBC News reported. Alex Vatanka, a senior fellow at the Middle East Institute, stated that there are “no signs of defection or other factions choosing this moment in time to come up with a counter-worldview.”
Iran has reportedly threatened oil prices could reach $200 per barrel, according to Fox Business. The United States is preparing a massive release of emergency petroleum reserves in an attempt to mitigate the impact of the supply disruption, but the effectiveness of this measure remains uncertain.
As of Thursday evening, the U.S. And Israel have not managed to secure the Strait of Hormuz, and Iran continues to maintain its position regarding the waterway’s closure. No further diplomatic initiatives or military actions have been publicly announced.
