Tensions between the United States and Iran escalated following a fresh military confrontation in the Strait of Hormuz, casting a shadow over ceasefire negotiations after ten weeks of conflict. International crude oil prices rose in response. On Thursday, West Texas Intermediate (WTI) crude surged as much as 4% at one point, approaching $99 per barrel, while Brent crude climbed back above the $100 per barrel mark.

The U.S. Central Command stated that American forces intercepted what it described as an unprovoked attack by Iran and conducted a defensive counterstrike as a missile destroyer transited the Strait of Hormuz. However, the command added that it had "no intention to escalate the situation." U.S. President Donald Trump noted on a social media platform that three naval vessels had successfully transited the waterway without damage following the incident. Regarding Iran, he added, "If they don’t sign a deal soon, we will hit them harder and more severely in the future!"

Global oil market attention remains fixed on the Strait of Hormuz, which has been effectively closed since late February. The closure has triggered an unprecedented energy supply shock, blocking a critical crude transit route and forcing the shutdown of oil wells across the region. The waterway is under a dual blockade: Tehran is obstructing navigation, while the U.S. has prohibited vessels from calling at or departing from Iranian ports.

Dennis Kissler, Senior Vice President at BOK Financial Securities Inc., indicated that until oil flows through the strait return to meaningful levels, "the downside for crude prices will be limited." The latest clash has intensified regional tensions even as the U.S. seeks to extricate itself from a conflict that is placing an increasingly heavy burden on consumers, with retail gasoline and diesel prices soaring.

This week, the Trump administration has been awaiting Iran’s response to proposals aimed at reopening trade channels, but Iranian leaders have yet to signal whether they will accept the terms. As hostilities persist, liquidity in the oil market has sharply declined. Rapidly shifting headlines and abrupt swings in market sentiment have fueled extreme volatility, making traders increasingly reluctant to hold positions. This has further amplified price swings in both Brent and WTI crude.

Fatih Birol, Executive Director of the International Energy Agency (IEA), warned that the world is losing 14 million barrels of oil per day because of the war. He reiterated during a visit to Canada on Thursday that the IEA is prepared to take further action, after member countries agreed in March to release 400 million barrels of oil. He noted that restoring oil production after the conflict ends would be a gradual process.

Reportedly, Ray Dalio, founder of Bridgewater Associates, suggested that the outcome of the U.S.-Iran conflict boils down to one fundamental question: who will ultimately control the Strait of Hormuz.

At the time of writing, the WTI crude futures contract for June delivery was up 2.34% at $97.03 per barrel. The July Brent crude futures contract rose 2.07% to $103.37 per barrel.