Oil Prices Surge on Trump Iran Strait of Hormuz Ultimatum

Oil prices surged on Monday following escalating threats between the United States and Iran over the Strait of Hormuz, a critical chokepoint for global oil shipments. The increase came as the conflict in the Middle East, now in its fourth week, showed no immediate prospect of de-escalation, prompting stark warnings about a potential worldwide energy crisis.

Brent crude initially rose over two percent, briefly exceeding $114 per barrel before settling at $109.34 at 9:45 AM West Africa Time. West Texas Intermediate traded in a range between $98.50 and $99.99. The OPEC reference basket also experienced significant volatility, climbing to approximately $115.54 per barrel. These movements reflect deepening market anxiety over supply disruptions.

The tension was ignited by a 48-hour ultimatum from U.S. President Donald Trump, who demanded Iran fully reopen the Strait of Hormuz to shipping or face the “obliteration” of its energy infrastructure, starting with its largest power plant. The strategic waterway, through which about one-fifth of the world’s global oil and liquefied natural gas passes, has been effectively closed. Iran responded by warning the strait “will be completely closed” if the U.S. acts, while parliamentary speaker Mohammad Bagher Ghalibaf threatened irreversible damage to regional infrastructure, suggesting oil prices would remain elevated “for a long time.”

The latest military escalation included reported explosions in Tehran following Israeli strikes, with Saudi Arabia and the UAE also reporting attacks. Israel’s military announced it would expand ground operations in Lebanon against Iran-backed Hezbollah, with a spokesman indicating the fight against Iran and its proxies could last several more weeks.

Fatih Birol, Executive Director of the International Energy Agency (IEA), described the situation as posing a “major, major threat” to the global economy, stating no country would be immune if the crisis persists. He noted the world is currently losing more oil daily than the combined impact of the 1970s oil shocks and Russia’s 2022 invasion of Ukraine. The warning coincides with growing investor concern that sustained high oil prices could drive inflation higher, potentially forcing central banks to raise interest rates further, as seen with the Reserve Bank of Australia last week. The disruption has also raised alarms about global food security due to the choking off of fertiliser shipments.

The confrontation underscores the profound vulnerability of global energy markets to geopolitical instability in the Middle East, with immediate consequences for fuel costs, inflation, and economic growth worldwide.