Alexander Manzyuk | Reuters
On Thursday, Brent crude reached a four-year peak after reports indicated the U.S. military was preparing to brief President Donald Trump regarding potential actions against Iran. This development amplified concerns about a possible resurgence of armed conflict and reinforced the existing American embargo on Iranian exports.
Axios, citing two informed sources, revealed that the U.S. Central Command was poised to brief Trump on potential military strategies concerning Iran.
Previously, Trump had reportedly turned down Tehran’s offer to re-establish access to the Strait of Hormuz, indicating that the naval embargo would persist until a comprehensive nuclear accord is finalized.
Futures contracts for international benchmark Brent crude for June delivery saw a 6.84% increase, reaching $126.10 per barrel, while U.S. West Texas Intermediate advanced 3.14% to $110.24.
Chart: Brent Crude Prices
According to LSEG data, Brent crude prices have soared to levels not seen since early 2022, attributed to supply constraints caused by the ongoing Middle East conflict.
Goldman Sachs projects that exports via the critical Hormuz strait have plummeted to merely 4% of their typical volume. This, coupled with stalled U.S.-Iran talks and a persistent American blockade, is further constricting global oil supplies.
Analysts at Goldman Sachs cautioned that if the blockade continues, restricted Iranian exports and inadequate storage capacity could intensify supply chain disruptions. They further noted that any increase in production from the UAE, post-OPEC exit, is expected to unfold gradually over the medium term, unlikely to alleviate immediate supply shortages.
On Wednesday, Trump seemingly issued a warning to Iran via a Truth Social post, stating the nation “better get smart soon!”
“Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon!” Trump declared. This message included an AI-generated image of Trump brandishing a weapon amidst explosions, overlaid with the text “NO MORE MR. NICE GUY!”
Bill Perkins, Skylar Capital Management’s chief investment officer, observed that a combination of physical supply interruptions, geopolitical tensions, and investor sentiment are influencing oil markets. He noted that traders are meticulously monitoring tanker activity and political cues as the U.S.-Iran standoff continues.
He commented, “We are quite distant from a resolution, and perhaps further hostilities or additional time will be [required] to facilitate the reopening of the Strait of Hormuz.”
Although strategic oil reserves and crude already en route have helped mitigate price surges, Perkins characterized product markets as considerably more stressed. He pointed to substantial hikes in diesel prices and persistent logistical challenges, even in the event of a ceasefire.
Goldman Sachs has identified developing risks to demand, indicating that global oil consumption in April might be approximately 3.6 million barrels per day below February’s figures, with the decline primarily observed in jet fuel and petrochemical feedstocks.
Looking forward, Perkins predicted that if interruptions continue, oil prices could surge to $140–$150 per barrel, though such high prices would ultimately dampen demand.
— Reporting for this article included contributions from CNBC’s Holly Ellyatt.