Oil prices experienced an uptick on Thursday following recent US military actions in Iran, which have rekindled concerns regarding potential disruptions to commercial shipping routes in the Strait of Hormuz. Brent crude, the global benchmark, experienced an increase of over 3%, reaching $97.29 per barrel, while US West Texas Intermediate crude rose by 3.42% to $91.71 per barrel. Iran’s Revolutionary Guards reported that they targeted a US airbase at approximately 4:50 a.m., although the IRGC did not reveal the specific location of the base. US officials reported that Central Command forces intercepted and destroyed four Iranian one-way attack drones that were deemed a threat in proximity to the Strait of Hormuz. The US military executed a strike on an Iranian ground control station located in Bandar Abbas, which was in the process of preparing to launch a fifth drone. The recent escalation follows shortly after the US military conducted what it characterised as “self-defense strikes” in southern Iran, aimed at vessels purportedly trying to deploy mines alongside missile launch sites. US Central Command indicated that the operation was designed to safeguard American troops and commercial shipping routes.

Iran’s Islamic Revolutionary Guard Corps subsequently announced its intention to respond to any violations of the ceasefire, following the detection and engagement of US drones and an F-35 fighter jet that had intruded into Iranian airspace. A US official indicated that the most recent strikes were aimed at an Iranian military installation thought to represent a risk to American forces and maritime navigation in the strait. Meanwhile, President Donald Trump remarked that Iran was “negotiating on fumes” and emphasised that the forthcoming US midterm elections would not compel him to hasten a resolution to the nearly three-month-old conflict. In a note released late Wednesday, Citi indicated that oil markets were stabilising as investors slowly shifted away from pricing in significant supply disruption risks, reflecting signs of progress in negotiations between Washington and Tehran. However, the bank noted that uncertainty regarding the timing of any agreement persisted in keeping central banks cautious, as policymakers evaluated the inflationary effects of high energy prices.

Citi noted that the ongoing increase in crude prices is starting to influence wider inflationary pressures via what it termed “second round effects,” prompting certain central banks to adopt a more hawkish approach. Swiss investment bank UBS stated on Friday that the pressure on the global oil market is intensifying, as inventories persist in their decline due to disruptions in shipments through the Strait of Hormuz. The bank observed a reduction in global oil inventories amounting to 246 million barrels during March and April, with total production losses potentially surpassing 1 billion barrels by the conclusion of May. Analysts indicated that even if an agreement is achieved, shipping operations through the strait may require several months to return to normal levels, while the restoration of damaged energy infrastructure could necessitate an even longer timeframe for complete recovery.

Earlier this month, Saudi Aramco CEO Amin Nasser cautioned that disruptions in Hormuz could postpone stability in global oil markets until 2027, with nearly 100 million barrels of oil supply per week potentially affected. Saudi Aramco stands as the preeminent oil producer globally. Morgan Stanley characterised the present oil market as being in “a race against time”, indicating that the elements that have thus far inhibited a more pronounced increase in crude prices could diminish if the Strait of Hormuz remains closed through June. The broking indicated that increased US crude exports and diminished demand from China have contributed to mitigating a portion of the supply shock. However, it cautioned that a prolonged closure of Hormuz could further constrain global supplies if disruptions persist beyond the capacity of the US and China to adequately compensate.