Oil Prices Surge to a Four-Year Peak Then Pull Back as US-Iran War Fears Grip Markets

Brent crude briefly crossed $126 a barrel its highest since early 2022 before retreating sharply. Fears of a prolonged Middle East conflict and a choked Strait of Hormuz are sending shockwaves through global oil markets.

Global oil prices shot up to a four-year high on Thursday then quickly pulled back. Brent crude touched $126.41 a barrel, the loftiest level since March 9, 2022. But the euphoria faded fast. By afternoon trading, Brent had dropped $3.96, or 3.36%, settling at $114.07. The June delivery contract was expiring Thursday. The more heavily traded July contract slipped to $109.98 down just 46 cents, or 0.42%.

WTI Also Swings Wildly

West Texas Intermediate crude America’s benchmark wasn’t spared either. WTI fell $2.36, or 2.21%, to $104.52. It had touched $110.93 earlier in the day the highest point since April 7. Despite the late-session retreat, both benchmarks remain on course for a fourth straight month of gains. That tells a clear story markets are deeply worried that the Iran conflict could strangle global oil supplies for months ahead.

What Triggered the Sudden Drop?

No single news headline caused the pullback. Analysts said it was simply the market’s extreme jitteriness since the Iran war began. “The decline did not look related to a specific development,” said Tamas Varga of PVM pointing instead to the wild volatility that has gripped energy markets. Data from LSEG showed two large sell orders for June Brent hitting the market earlier in the session. Analysts also noted that contract expiry days tend to see bigger-than-usual price swings.

“It’s massive movements, like intraday movements, as much as we usually have in months,” said Ole Hvalbye, analyst at SEB Research. “It’s a mess… it’s very difficult to calculate and try to make up some fundamental view on this.”

Andrew Lipow of Lipow Oil Associates offered a simpler read. “You might just saw some profit taking after yesterday’s significant rally in Brent,” he said while pointing out that the underlying fundamentals hadn’t changed at all.

A Weaker Dollar Added Pressure Too

The US dollar’s retreat on Thursday also played a part in dragging oil lower. Japan’s yen surged 3% its biggest single-day jump in over three years. Tokyo officials had issued stern warnings that currency intervention and possibly action in energy markets could be imminent. That yen surge dragged the dollar down toward its steepest one-day loss against the yen since last August. A weaker dollar typically pressures dollar-denominated commodities like oil.

Earlier in the day, markets had pushed higher after a report citing unidentified sources said US President Donald Trump was due to receive a Thursday briefing on plans for a series of military strikes on Iran. The goal to push Iran back to the nuclear negotiating table. A US official confirmed the meeting would also include Defense Secretary Pete Hegseth and General Dan Caine, chairman of the Joint Chiefs of Staff.

Oil Has Nearly Doubled Since the War Began

The numbers are staggering. Brent crude has doubled in price since the US-Israeli military offensive against Iran kicked off on February 28. WTI is up around 90% over the same period. The driver the near-total closure of the Strait of Hormuz, through which roughly one-fifth of the world’s oil and liquefied natural gas normally moves. The price surge carries serious consequences renewed inflation globally and sharply higher pump prices in the US, ahead of midterm elections later this year. Oil, gas, and their refined products are the lifeblood of modern economies powering vehicles, heating homes, running industries, and producing plastics and fertilizers.

Trump declared a ceasefire earlier this month but simultaneously imposed a US blockade on Iranian ports. Peace talks have since hit a wall. The US insists on putting Iran’s alleged nuclear weapons programme on the table. Iran, for its part, demands some degree of control over the strait and reparations for war damage. The death toll runs into the thousands. And the International Energy Agency has called this the biggest oil supply disruption the world has ever seen.

“Prospects for any near-term resolution to the Iran conflict or a reopening of the Strait of Hormuz remain dim,” said Tony Sycamore, market analyst at IG.

Shipping Through Hormuz Down to a Trickle

The numbers on Strait traffic paint a grim picture. In the past 24 hours, just seven ships crossed the waterway a tiny fraction of normal flow. Of those, three were dry bulk carriers, one was a container ship, and two were bitumen tankers, according to Kpler ship-tracking data and satellite analysis by SynMax. Before the war, anywhere between 125 and 140 vessels used the route every single day.

The strait’s closure is overshadowing even bigger structural shifts in the oil market including the UAE’s dramatic exit from OPEC+. The UAE announced Tuesday it would leave the Organisation of Petroleum Exporting Countries after nearly 60 years as a member. Senior OANDA analyst Kelvin Wong said the strait closure far outweighs the long-term significance of that exit. Analysts say the most likely relief valve for the current supply crunch may simply be demand destruction where oil prices climb so high that consumers and industries are forced to cut back.