Key Points:
- Oil prices moved higher on Friday following military clashes between American and Iranian forces in the Strait of Hormuz.
- President Donald Trump claims a temporary ceasefire remains active while leaders wait for Iran to review a peace proposal.
- The U.S. economy unexpectedly added 115,000 jobs in April, beating estimates, while unemployment held at 4.3%.
- Fitch Ratings raised its 2026 oil price forecasts, predicting the vital shipping strait will remain closed until July.
Oil prices crept higher on Friday after American and Iranian forces clashed in the Strait of Hormuz. Light crude oil prices increased 0.18% to $94.98 a barrel, while Brent crude rose 1.23% to $101.29 a barrel. Despite the fresh violence, President Donald Trump told reporters that a temporary ceasefire between Washington and Tehran still stands.
The chaotic situation in the critical waterway completely dominates the energy market. Iran effectively closed the Strait of Hormuz at the end of February. This massive closure triggered the biggest oil supply disruption in world history. About 20% of the global oil and gas supply normally flows through this narrow channel, leaving energy traders extremely worried about the future.
American forces actively confront Iranian ships in the region. The U.S. military started blocking Iranian ports and coastlines in mid-April to pressure the government in Tehran. On Friday, the U.S. Central Command announced its troops fired at two empty Iranian oil tankers. The military disabled both ships as they tried to enter a port in the Gulf of Oman. Forces also disabled a third empty tanker earlier on Wednesday.
The violence goes both ways. Earlier in the week, Iran attacked three American warships traveling through the Strait. The United States quickly struck back. American forces hit targets at the Iranian port of Qeshm and the city of Bandar Abbas to punish the attackers. The U.S. also paused a special mission called Project Freedom, which originally aimed to help commercial cargo ships safely transit the dangerous waters.
Politicians continue to push for a permanent end to the fighting. Iran is currently reviewing a short 14-point peace proposal but has not made a final decision. Trump brushed off the recent Iranian attacks as a minor issue but issued a harsh warning online. He promised to hit Iran much harder and more violently if its leaders refuse to sign the peace agreement quickly. Secretary of State Marco Rubio noted that American officials expect Iran to respond soon.
Even with the Friday price bump, oil markets actually lost ground over the past few days. Oil prices fell about 6% for the entire week. Traders keep selling oil contracts because they strongly believe the two countries will finalize a peace deal very soon.
Away from the military conflict, the American economy delivered surprisingly good news. The government released the widely anticipated April jobs report on Friday. The United States added 115,000 new jobs last month. This number easily beat the 65,000 new jobs that financial experts originally predicted. The national unemployment rate stayed completely flat at 4.3%.
Financial analysts monitor this job data closely because the ongoing war is pushing inflation higher. High oil prices make everyday goods more expensive for ordinary citizens. Analysts worry that workers will demand higher wages to offset the cost of gas and groceries. This dynamic forces the Federal Reserve to reconsider how it handles interest rates.
Traders previously thought the Federal Reserve might raise interest rates this year to fight war-driven inflation. However, the new jobs report changed their minds. Financial experts now believe the central bank will wait much longer. David Doyle, the head of economics at Macquarie Group, stated that he expects the Federal Reserve to hike rates in the first half of 2027.
Wall Street analysts also changed their long-term views on energy costs. Fitch Ratings updated its global oil price projections on Friday. The major credit agency now expects Brent crude to average $87 a barrel for the year 2026. This represents a massive jump from its previous guess of $70 a barrel. Fitch also expects West Texas Intermediate crude to average $80 a barrel this year, up from its earlier $65 estimate.
Fitch changed its math because experts realize the Strait of Hormuz will remain closed for a long time. The agency now assumes the closure will last for 5 months. They previously guessed the waterway would remain shut for only 1 or 2 months. Fitch predicts the Strait will finally begin reopening around July.
The reopening process will determine the future of the global energy market. Before the fighting started, 15 million barrels of crude oil passed through the strait every single day. Another 5 million barrels of oil products are also used on the route daily. Fitch warned that while the shipping lanes could open quickly, the actual process might involve heavy political tension and severe delays.
