The renewed US naval blockade around Iran has revived fears that a meaningful share of global crude flows through the Strait of Hormuz could be disrupted, keeping a geopolitical risk premium firmly embedded in benchmark prices. Traders are also digesting the record widening in diesel refining margins, which points to a tightening middle distillate market as Ukrainian strikes curb Russian fuel exports. With Brent now sitting in overbought technical territory for a second straight session, some profit taking risk exists, but sentiment remains skewed toward further upside given the risk that the conflict widens rather than de escalates. Softer US inflation data did little to alter the picture, suggesting supply side geopolitical risk is currently dominating over demand side macro signals.
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Renewed US-Iran hostilities and Russian refinery strikes push oil and diesel prices sharply higher.
Summary:
- Brent and WTI both climbed to their highest settlement levels in about a month, according to Reuters
- The rally came after the US reinstated a naval blockade on Iranian shipping and launched further strikes on Iran, according to Reuters
- Trump dropped a proposed fee for use of the Strait of Hormuz in favour of pursuing investment deals with Gulf states, according to Reuters
- Ukrainian strikes on Russian refineries curbed Russian diesel exports, pushing US diesel futures up sharply faster than crude gains this month, according to Reuters
- A crew member was killed and several others wounded when Iranian missiles struck two Emirati tankers, according to Reuters
- The US Central Command said it resumed its naval blockade of Iranian ports and coastal areas, with more than 20 navy warships and hundreds of aircraft operating across the Middle East, according to a US Central Command statement
- Strikes were reported across multiple Gulf and Levant states as the earlier ceasefire continued to unravel, according to a separate market update
Oil prices pushed to a fresh one-month high as the conflict between the United States and Iran intensified, with fresh US strikes and a reinstated naval blockade around the Strait of Hormuz reviving concerns over global supply disruption. Brent crude settled up around 1.5% at roughly $85 a barrel, while US West Texas Intermediate rose a similar margin to around $79. Both benchmarks notched their highest closes in about a month, with Brent remaining in technically overbought territory for a second consecutive session, something not seen since March.
Analysts pointed to the resumption of hostilities between Washington and Tehran as the key driver, with additional US strikes overnight adding to expectations that the exchanges will continue. The Strait of Hormuz, through which around a fifth of global oil supply normally passes, has been at the centre of the standoff. President Trump stepped back from an earlier proposal to impose a fee on shipping using the strait, opting instead to pursue investment arrangements with Gulf states. Hours before that fee was due to take effect, Trump said the strait remained open to all traffic other than Iran’s own vessels, a comment that briefly pushed US crude into negative territory before prices recovered.
Prices firmed further after reports that a crew member was killed and several others wounded when Iranian missiles struck two tankers linked to the United Arab Emirates. The episode reinforced doubts that a recent memorandum of understanding will hold, after weeks of disruption to global energy supply and renewed inflation concerns.
Separately, Ukrainian strikes on Russian energy infrastructure, including refineries in the Bashkortostan and Krasnodar regions, have curbed Russian diesel exports and lifted diesel prices internationally. US diesel futures are up around 20% so far this month, comfortably outpacing the roughly 14% rise in US crude, pushing refining margins to record levels.
US inflation data released the same day showed price growth slowing by more than expected, but this had limited impact on oil markets, with participants instead focused on the escalating military situation. The US Central Command later confirmed it had resumed its naval blockade of vessels moving to and from Iranian ports, backed by more than 20 warships and hundreds of aircraft, underscoring how far the conflict has escalated beyond the earlier ceasefire.
This article was written by Eamonn Sheridan at investinglive.com.