Oil Hits Wartime High on Report US Eyeing Iran Military Options
(Bloomberg) -- Brent oil rallied to a wartime high after Axios reported that US President Donald Trump is set to receive a briefing on new military options for action in Iran, signaling the potential for fresh escalation in the Middle East.
The global benchmark surged as much as 7.1% to eclipse $126 a barrel and hit the highest intraday level in four years, while West Texas Intermediate jumped above $110. The head of US Central Command Admiral Brad Cooper will brief Trump on Thursday, signaling a resumption of combat operations are seriously under consideration, Axios said, citing two unnamed people.
A ceasefire has held since early April but recent efforts to get negotiators from the two sides to meet have so far failed, with the US and Iran both maintaining their blockade of the the vital Strait of Hormuz. Central Command has asked for hypersonic missiles to be sent to the Middle East, which would mark the first time the American army has deployed those weapons.
The Strait of Hormuz has been effectively closed since the war started at the end of February, choking off flows of crude, natural gas and oil products, and driving up energy prices. On Tuesday, Trump discussed steps the US could take to prolong its blockade while minimizing the impact on American consumers at a meeting with oil and trading executives, the White House said.
“Trump has ripped away the security blanket the market was clinging to — the hope that the war was about to end,” said Robert Rennie, head of commodity research at Westpac Banking Corp. “Traders are now being forced to confront a much uglier reality: both sides still think they are winning, neither side has a clear incentive to negotiate, and energy prices are starting to accelerate higher.”
US Central Command has prepared a plan for a “short and powerful” wave of strikes on Iran, likely including infrastructure targets, according to the Axios report. Admiral Cooper gave the American president a similar briefing on Feb. 26, shortly before the US and Israel started the war, Axios said.
Trading volumes are thin for Brent’s June contract, which is set to expire at the end of the session. The more-active July futures advanced as high as $114.70 a barrel to the highest intraday level since June 2022.
Blockades of the Strait of Hormuz by the US and Iran have reduced daily transits to near zero. The International Energy Agency called the conflict in the Middle East the biggest supply shock in history, and Vitol Group says the market is facing a supply loss of around 1 billion barrels.
Trump told Axios separately that he would not lift a naval blockade on Iran’s ports until he secures a nuclear deal with Tehran, with Iranian officials defiant over a prolonged standoff. The US has turned away dozens of ships since deploying warships to stop Iranian vessels on April 13.
The US is now seeking the forfeiture of two Iran-linked oil tankers that were seized by naval forces. Forfeiture, or confiscating oil cargoes, would represent an escalation of Trump’s economic offensive — and dovetail with Washington’s strategy deployed after the ousting of Venezuelan President Nicolás Maduro.
The Trump administration is also asking other countries to join an international coalition that would enable ships to navigate the Strait of Hormuz, according to a report from the Wall Street Journal, which cited an internal State Department cable sent to US embassies on Tuesday.
US crude exports surged to a record last week as global buyers tapped American producers for barrels to replace lost supply from the Middle East. Overseas shipments rose above 6 million barrels a day, eclipsing a previous high of nearly 5.3 million set in late 2023.
Some market metrics pointed to a tightening supply with the difference between Brent’s two closest December contracts strengthening to over $11 a barrel compared to around $3 two months ago.
“Somehow, another few weeks of stalemate does not look like something that will sit well with Trump,” said Vandana Hari, founder of analysis firm Vanda Insights.“ Prices have nowhere to go but up until a Strait of Hormuz reopening comes into line of sight. As of now, how and when that might happen is anybody’s guess.”
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