Global oil prices surged to their highest level in four years on Thursday as escalating tensions between the United States and Iran fueled fears of renewed conflict and deepening supply disruptions across the Middle East.
International benchmark Brent crude jumped more than six percent to trade above US$126 per barrel, while US benchmark West Texas Intermediate also posted strong gains. The rally follows reports that the US military is preparing to brief President Donald Trump on potential military options targeting Iran.
Markets were already on edge amid an ongoing US blockade of Iranian oil exports, which analysts say has sharply curtailed supply flows through the region. Concerns intensified further after reports suggested Washington is considering an extended strategy to pressure Tehran, including maintaining restrictions around the vital Strait of Hormuz.
The narrow waterway, which connects the Persian Gulf to global markets, is one of the world’s most critical oil transit routes. Any disruption there has immediate and far-reaching consequences for global energy supplies.
“Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon,” Trump said in a social media post late Wednesday, underscoring the increasingly confrontational tone between Washington and Tehran.
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Analysts say oil markets are being driven by a volatile mix of physical supply constraints, geopolitical risks and investor sentiment.
“Traders are watching every signal — from tanker movements to political rhetoric,” said Bill Perkins, chief investment officer at Skylar Capital Management. “Right now, the market is pricing in the possibility that things could get worse before they get better.”
Data from investment bank Goldman Sachs suggests that oil flows through the Strait of Hormuz have dropped to just a fraction of normal levels, compounding concerns about tightening supply. The bank warned that limited storage capacity and constrained exports from Iran could exacerbate shortages if the situation persists.
While some producers may attempt to increase output, analysts caution that additional supply is unlikely to offset immediate disruptions. The United Arab Emirates, for instance, is expected to boost production only gradually, offering little short-term relief.
The surge in crude prices is already rippling through global energy markets, with refined products such as diesel experiencing sharper increases due to logistical bottlenecks and limited refining capacity.
Despite the bullish price movement, some analysts flagged emerging risks to demand. Goldman Sachs noted that global oil consumption may have fallen significantly in April compared to earlier in the year, with weakness particularly evident in jet fuel and petrochemical sectors.
Higher prices tend to curb demand over time, as consumers cut back on travel and industries scale down energy use. However, in the near term, geopolitical developments remain the dominant force shaping market dynamics.
“If disruptions continue or escalate, oil could climb toward US$140 or even US$150 per barrel,” Perkins said. “But those levels would eventually start to destroy demand.”
The current standoff comes against the backdrop of stalled negotiations between Washington and Iran over a broader nuclear agreement, further complicating efforts to ease tensions.
For now, markets remain highly sensitive to any developments, with investors bracing for further volatility in the days ahead.
“The situation is fluid,” Perkins added. “And until there’s clarity, the risk premium in oil is here to stay.”
