Key Points:
- President Trump’s escalating threats against Iran are driving up oil prices.
- The reopening of the Strait of Hormuz is a major point of contention.
- Iran warns of retaliatory attacks on energy infrastructure if the U.S. strikes.
- Concerns about immediate oil supply are increasing, evident in WTI’s prompt spread.
Oil prices climbed for a third consecutive day as President Trump intensified his rhetoric, threatening to dismantle key Iranian infrastructure if a deal isn’t reached by a Tuesday deadline. Brent crude surpassed $111 a barrel, following a 0.7% gain, while West Texas Intermediate (WTI) hovered around $115, marking its highest close since June 2022.
Despite Trump’s recent assertion that talks with Iran are “going well,” he underscored the critical importance of reopening the Strait of Hormuz. The president starkly outlined the repercussions Iran would face if it failed to comply by his 8 p.m. Eastern Time Tuesday cutoff. He warned that the U.S. military could destroy “every bridge in Iran by 12 o’clock tomorrow night” and render power plants “burning, exploding and never to be used again,” actions that would violate the Geneva Conventions.
In response, Iran has cautioned that it would escalate its own assaults on energy infrastructure within the Persian Gulf should such strikes occur. This could exacerbate the global fuel crunch and inflict further damage on the world economy. The ongoing conflict, now in its sixth week, has significantly disrupted crude markets, causing a severe supply shock.
Robert Rennie, head of commodity research at Westpac Banking Corp., predicted that if Trump proceeds with his “decimation” strategy and Iran retaliates with “more crushing” and “more extensive” attacks, oil prices could gain momentum, pushing beyond $110 towards $120. However, he noted that if Trump extends the deadline again, prices would likely remain within the current
The prolonged conflict is fueling growing concerns about near-term supply. The prompt spread for WTI, which measures the difference between its two nearest contracts, briefly reached nearly $15.50 a barrel on Monday. This was close to its largest premium ever, driven by increasing expectations of tighter U.S. supplies as international buyers rush to acquire American crude.
