Crude Oil Prices Surge as Tehran Says It Has Closed the Strait of Hormuz; Threatens Ships Trying to Pass: Report

Crude oil prices soared to multi-month highs on Tuesday after a dramatic escalation in the Middle East. The killing of Iran's Supreme Leader in coordinated U.S.-Israeli strikes has plunged the region into a wider conflict, with Tehran immediately retaliating and closing the world's most critical oil chokepoint. Markets are now bracing for a prolonged period of supply disruption and geopolitical instability. 

WTI Crude futures surged 63 cents, or 0.88%, to US$71.86 a barrel, after touching a high of US$72.13 earlier in the session, the highest level since late last year.  

Brent crude futures climbed 68 cents, or 0.87%, to US$78.47, nearing the top of its 52-week range after hitting a peak of US$79.03. 

Strait of Hormuz Closed as Iran Vows Retaliation: Report 

The primary catalyst for the spike in crude oil prices is the closure of the Strait of Hormuz. A commander of Iran's Revolutionary Guard has declared that the narrow transit point, through which nearly 20% of the world's global crude supply passes, is now closed. According to reports from Iranian Media cited by Reuters, Tehran has vowed to "set any ship trying to pass through the Strait on fire." 

The drastic measure follows large-scale strikes by U.S. and Israeli forces that killed Supreme Leader Ayatollah Ali Khamenei and numerous senior Iranian commanders. In response, Tehran has launched missile barrages across the region, widening the conflict. 

Conflict Spreads Across the Region 

The war is no longer contained within Iran's borders. Israeli forces have conducted strikes on Lebanon following attacks by Hezbollah, adding another layer of complexity to the crisis. In a sign of the heightened chaos, a reported incident also saw Kuwaiti air defences mistakenly down U.S. jets, underscoring the severe risks of the conflict widening further. 

U.S. President Donald Trump indicated that the operation could continue for several weeks and acknowledged the uncertainty within Iran's leadership following the death of Khamenei. This has led market analysts to price in a significant and prolonged risk premium, as the potential for further instability remains high. 

Supply Fears Bolster Inflation Outlook 

The sharp surge in crude oil prices, driven by immediate supply risk fears, has in turn bolstered inflation expectations. With a vital artery for global energy flows effectively shut, traders are bracing for a physical supply crunch that could ripple through the global economy.  

While the situation remains highly fluid, the immediate outlook for crude oil prices is decisively bullish as the market digests the reality of a major war in the heart of the oil-producing region. 

Read more: Crude Oil Prices Surge Most in 4 Years as Iran Conflict Disrupts Gulf Tanker Flows! 

Conclusion 

For now, crude oil prices are being propelled by the highest geopolitical risk premium in years. With the Strait of Hormuz closed and a major power's leadership decapitated, the oil market has entered uncharted territory. Prices are likely to remain extremely volatile and sensitive to any further military developments or diplomatic efforts to contain the conflict. 

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