US crude and Brent oil spike on Trump’s Iran attack threats

Global Oil Market – (Web Desk) – Oil markets had a wild Thursday. Prices jumped hard and fast. Traders were rattled. And at the center of it all was one thing: fear that oil supply from the Middle East could stay disrupted for a long time.

US West Texas Intermediate crude closed at $111.54 a barrel. That is an $11.42 gain in a single day. It is the biggest one-day price jump since 2020. Brent crude was not far behind. It settled at $109.03, up $7.87 on the day.

Both numbers are big. But neither reached the $120 a barrel peak that markets hit earlier when the conflict first broke out.

So what pushed prices so high on Thursday? President Donald Trump. He told the world that US military operations against Iran are not slowing down. They are speeding up.

“We are going to hit them extremely hard over the next two to three weeks,” Trump said. “We are going to bring them back to the Stone Ages, where they belong.”

He gave no hint of when the fighting might stop. He also said nothing about reopening the Strait of Hormuz. That waterway matters enormously. One fifth of the world’s oil and liquefied natural gas travels through it. Iran shut it down after US and Israeli strikes began on February 28.

Getting that strait back open is now a top priority for governments everywhere. Energy prices are climbing. Households and industries are feeling it.

There was a small bit of news that gave markets a sliver of hope. Iran is apparently working with Oman on a plan to monitor ship traffic through the strait. An Iranian foreign ministry official confirmed that talks are ongoing, following a Bloomberg report on the matter.

But traders are not convinced things will ease up soon. Dennis Kissler, a senior vice president at BOK Financial, put it plainly. He said markets are asking a very serious question right now. If Iran’s oil facilities could be next in line for strikes, and if more destruction in the region is likely, then even the best-case scenario looks grim. Oil flows from the area are going to take longer to restart. Much longer.

There was also an unusual pricing quirk worth noting. WTI normally trades a little cheaper than Brent. Not on Thursday. WTI was priced about $3 above Brent. That gap is the widest it has been in a year. It comes down to timing. The WTI contract covers May delivery. The Brent contract covers June. Traders are paying more for oil they can get sooner.

The coming days will tell us a lot. Every word from Washington or Tehran will move markets. For now, oil is expensive, the strait is closed, and nobody knows when either of those things will change.

“Market’s expectation is that if (the) Strait of Hormuz opens up in (a) couple of weeks this risk premium will immediately go down,” said John Kilduff, Partner at Again Capital.

Federal Reserve Bank of Dallas President Lorie Logan said on Thursday that a swift war resolution may mean economic impact could be pretty moderate, adding that the economic outlook was uncertain due to the crisis. The United States has some buffers to impacts from the war, Logan said.

Brent crude prices could average $95 a barrel in the base case and $130 a barrel in the bull case in the second half of the year, Citi said, while oil prices could climb to between $120 and $130 a barrel in the near-term, JP Morgan said. Prices could rise above $150 if the Strait remains closed into the middle of May, JP Morgan added.

US oil rigs, an indicator of future output, rose by two to 411 this week, energy services firm Baker Hughes said. An increase in prices for oil to be delivered in future months has producers considering adding more rigs, but they have cautioned that they would like to see the higher prices hold for longer to do so.

Front-month WTI traded at its largest-ever premium over the second-month and seventh-month contract on Thursday.

Pakistan Pushes for Middle East Ceasefire

Britain is hosting a virtual meeting of around 40 countries to discuss options for reopening the Strait of Hormuz. The United States is not due to attend.

OPEC+, meanwhile, is likely to weigh a further oil output increase on Sunday, sources said. This would position members to add more barrels should the Strait of Hormuz reopen but is not likely to meaningfully increase supply before then.

In Russia, Ukraine’s strikes on port infrastructure, pipelines and refineries have reduced export capability by 1 million barrels per day, or a fifth of total capacity, sources say, enough to set the stage for imminent production cuts.

The head of the International Energy Agency also said that supply disruptions would start to affect Europe’s economy in April, after the region had previously been shielded by cargoes contracted before the start of the war.