Oil Jumps After U.S. Strikes in Iran, Strait of Hormuz Risk Returns

Oil prices jumped sharply on Thursday after fresh U.S. military strikes in Iran renewed concerns over disruptions to commercial shipping through the Strait of Hormuz. Brent crude futures, the international benchmark, gained over 1.81% to $96 per barrel. West Texas Intermediate futures climbed 1.86% to $90.33 per barrel.

The escalation came as American forces launched strikes against a military site that a U.S. official said threatened troops and commercial shipping. U.S. forces also intercepted and downed several Iranian drones. The Strait of Hormuz is the world's most critical oil chokepoint, handling roughly one-fifth of global petroleum consumption. Any military action that raises the probability of shipping disruptions forces traders to embed a supply-risk premium into crude.

The De-Escalation Narrative Under Pressure

Citi published a note late Wednesday arguing that oil markets were finding firmer footing as investors increasingly priced out worst-case supply disruption scenarios. The bank cited signs that Washington and Tehran were moving closer toward an agreement. Thursday's strikes directly contradict that trajectory, at least in the short term. The market had been repricing downward the probability of a major disruption. The strikes force a reversal of that repricing.

Citi cautioned that uncertainty over any deal's timing was keeping central banks on alert. Policymakers are weighing tighter monetary settings in response to energy-driven inflation risks. The bank said the prolonged run-up in crude was beginning to spill into broader inflation pressures through second round effects. That feedback loop now appears more entrenched.