Crude Gains as Hormuz Blockade Persists

Oil edged higher as traders weighed signs the US and Iran may extend a ceasefire against a double blockade of the Strait of Hormuz that continues to impede flows.

West Texas Intermediate rose 3.7% to settle below $95 a barrel, while Brent closed near $99. Washington and Tehran are considering a two-week ceasefire extension to allow more time to negotiate a peace deal, according to a person familiar with the matter. US President Donald Trump said prospects for securing a deal with Iran are "looking very good."

His comments run counter to some Gulf Arab and European leaders, who predict that a US-Iran peace deal will take about six months to be brokered.

In the Strait of Hormuz — which connects the Persian Gulf to global markets — movements remain all-but paralyzed as the conflict approaches the end of its seventh week. The US has set up a blockade to cut off Iranian traffic, while Tehran is keeping the critical waterway closed to most other ships.

The commander of Iran’s joint military headquarters warned the armed forces "will not permit any exports or imports" in the Persian Gulf, the Sea of Oman or Red Sea if the US blockade continues for long. US Defense Secretary Pete Hegseth said the American military is ready to resume combat whenever President Donald Trump gives the order and urged Iran’s leaders to choose wisely.

The crude market has been upended by the conflict, which triggered an unprecedented supply shock that’s lifted inflationary pressure while hurting economic growth.

Trump earlier said in a social media post that Lebanon and Israel agreed to a 10-day ceasefire staring 5 p.m. ET on Thursday, leading prices to pare some gains before quickly recovering. Fighting between Israel and Iran-backed Hezbollah in Lebanon has threatened to derail negotiations between Iran and the US over the trajectory of their conflict and the ongoing closure of the crucial waterway.

Finance chiefs gathered in Washington this week were uneasy about the lack of clarity over what comes next, and the war "has made the whole world poorer," New Zealand Finance Minister Nicola Willis said.

Still, while crude contracts remain about a third higher than before the war, they are well below peaks seen in the opening weeks of the conflict, as well as other markers such as Dated Brent, a key gauge of real-world barrels. At present, the forward curve is failing to show the true magnitude of the crisis, said Kaes Van’t Hof, chief executive officer of Diamondback Energy Inc.

"The physical market is really demanding much higher prices," said Barclays Plc analyst Lydia Rainforth in a Bloomberg TV interview. "We’ve lost over 10 million barrels a day of supply — these are big, big numbers."

Oil market disruptions look set to deepen with the US blockade in place, according to Commonwealth Bank of Australia. That’s because the naval action puts at risk the roughly 3.8 million barrels of crude and products carried through the waterway last month, analyst Vivek Dhar said in a note.

Signs of demand destruction are also cropping up domestically. At least one budget airline has cut all of its flights to and from Los Angeles, citing high costs of jet fuel. US Energy Secretary Chris Wright said that the Trump administration plans to take additional steps to lower gasoline prices, which recently surpassed 2022-highs.

Across Asia-Pacific, the fallout has been acute given the reliance on the Persian Gulf for flows. Thailand is racing to secure shipments of oil and fertilizer, with Foreign Minister Sihasak Phuangketkeow in Oman to negotiate emergency supplies and press for safe passage of vessels.

In Australia, a major fire at one of the country’s only two oil refineries — Viva Energy Group Ltd.’s Geelong refinery, near Melbourne — is set to curtail fuel production, raising additional concerns about supplies. And in India, officials say the shockwaves from the war could be as disruptive as the pandemic six years ago.

Oil Prices

• WTI for May delivery added 3.7% to settle at $94.69 a barrel in New York
• Brent for June settlement rose 4.7% to settle at $99.39 a barrel