Crude surged more than 7% when markets opened Sunday evening, with Brent crude jumping over $7 per barrel to $102.29 and U.S. West Texas Intermediate rising roughly $8 to $104.56. The sharp move reflects trader expectations that a ceasefire agreement struck last week will do little to restore normal shipping through the Strait of Hormuz.
President Trump announced Sunday morning that the U.S. will impose a naval blockade on Iran and the critical waterway, hours after peace negotiations in Pakistan collapsed without agreement. The announcement signals a dramatic shift in Washington's approach to leverage the nation uses to control tanker traffic and extract concessions from the international community.
The price spike effectively erases gains from last week's initial ceasefire reaction, when markets briefly softened on hopes the deal might ease Middle East tensions. Traders are now betting that even with a truce in place, commercial shipping will remain heavily restricted by both Iranian threats and U.S. military presence.
Analysts at the Eurasia Group said Sunday that Iran's continued threat to attack ships that refuse to pay tolls will compound the impact of Trump's blockade, likely keeping shipping volumes at less than 10% of prewar levels. That constraint means sustained pressure on global energy costs and delayed relief for American consumers.
The average U.S. gasoline price stands at $4.13 per gallon after dipping slightly in recent days, according to AAA data. Extended crude prices near or above $100 per barrel would slow any further improvement at the pump.
Trump's blockade strategy may hinge on a calculation that Beijing will become a more active negotiating partner if faced with a cutoff of Iranian oil shipments to Chinese refineries, according to Helima Croft, an analyst at RBC Capital Markets. The move puts pressure on Iran's primary buyer to engage in talks.
However, Croft warned that Tehran could respond by escalating attacks on regional energy infrastructure if Trump follows through on the blockade threat. That escalation risk adds another layer of uncertainty to already volatile markets and could drive prices higher still if military tensions flare.
Comments