Concerns that the United States may initiate a new round of military strikes against Iran have intensified market anxieties. Such actions could provoke rapid missile retaliation from Tehran, potentially plunging the Middle East back into severe geopolitical turmoil. There are additional concerns that Iran might target the region's extensive network of undersea internet cables. As a result, the international crude oil benchmark, Brent crude futures, surged significantly during early Asian trading hours on Thursday, reaching their highest level since the onset of recent conflict and the peak period of the Russia-Ukraine war in 2022. Recent media reports indicate that U.S. President Trump is scheduled to receive a new briefing on potential military action options against Iran, signaling a potential escalation of tensions in the Middle East. The global benchmark crude price rose more than 5% during the early Asian trading session, breaking through to its highest intraday level since June 2022 and continuing to climb above $124 per barrel. West Texas Intermediate (WTI) crude, the benchmark for North American oil pricing, approached $109 per barrel. According to a report by Axios, as negotiations to reopen the critical Strait of Hormuz have stalled, President Trump will be briefed on Thursday by Admiral Brad Cooper of U.S. Central Command on new potential military-level strike options targeting Iran. Market hopes for a ceasefire have been dashed once again as new U.S. military options surface. The U.S. military has reportedly requested the deployment of hypersonic missiles to the Middle East, which would mark the first-ever deployment of such powerful weaponry by the United States. President Trump earlier told Axios that the maritime blockade of Iranian ports in the Strait of Hormuz would not be lifted prior to reaching a nuclear agreement with Tehran. Media reports citing informed sources reveal that U.S. Central Command has submitted a force deployment request. This plan involves moving the Army's developmental Long-Range Hypersonic Weapon (LRHW), also known as "Dark Eagle," to the Middle East to potentially strike deep targets within Iran if necessary. If approved, this would constitute the first actual deployment of hypersonic missiles by the U.S., despite the project being long-delayed and not yet declared fully operational. As illustrated, oil prices have climbed to their highest point since June 2022, with Brent crude touching new highs since the beginning of the conflict with Iran. Since the conflict began in late February, the Strait of Hormuz has been effectively closed, severely disrupting the flow of crude oil, natural gas, and petroleum products, and substantially driving up energy prices. The White House stated that on Tuesday, President Trump met with executives from the oil and commodity trading industries. They discussed measures the U.S. government could take to prolong the comprehensive blockade of shipping in the Strait of Hormuz related to Iran, while attempting to minimize the impact on energy prices for American consumers. Iranian officials maintain a hardline stance. According to state TV, senior Iranian military advisor Mohsen Rezaee vowed that the country would respond if the U.S. blockade continues. As reported by the Tasnim News Agency, Iranian Parliament Speaker Mohammad Bagher Ghalibaf accused President Trump of trying to force Tehran into submission through economic pressure and internal division. As shown, the ongoing U.S. military blockade continues to suppress all shipping in the Strait of Hormuz associated with Iran. Robert Rennie, Head of Commodity Research at Westpac Banking Corp., commented, "President Trump has ripped away the security blanket the market was clinging to—the hope that the war was nearing an end. Traders are now forced to confront a uglier reality: both sides still believe they are winning, neither has a clear incentive for long-term ceasefire talks, and energy prices are beginning to accelerate higher." Trading volume was light for the Brent crude June contract, which expires at the end of the current trading session. The more actively traded July futures contract rose above $112 per barrel, after also closing on Wednesday at its highest level since June 2022. The Strait of Hormuz faces a 'reckoning moment'. The halt of this global energy artery means paper oil markets are beginning to catch up with the physical supply crisis. The U.S. and Iranian blockades of the Strait of Hormuz have reduced daily transit volumes to near zero. The International Energy Agency has described the current geopolitical conflict surrounding the Strait of Hormuz as the largest energy supply disruption shock in history. Commodities trading giant Vitol Group recently stated that the market is facing a supply loss of approximately 1 billion barrels. The Trump administration is escalating economic pressure on Tehran by seeking to fully confiscate two tankers linked to Iran, which were seized by U.S. Naval forces enforcing the blockade. At President Trump's direction, U.S. forces are attempting to constrain the trading space for buyers of Iranian crude to achieve a comprehensive economic blockade of Iran. Concurrently, Iran is prohibiting any vessels from freely leaving the Strait of Hormuz. This escalating standoff risks further delaying the potential reopening of the strait. Due to the "dual blockade" of the Strait of Hormuz by the U.S. and Iran—a mutual choice to exert maximum pressure—observable shipping traffic through the strait has recently stagnated, with only a small number of small vessels still transiting. Since the blockade began on April 13, the U.S. government emphasizes that it has forced dozens of ships to turn around. Confiscating the petroleum cargo from Iran-linked tankers would represent an escalation of the Trump administration's economic offensive—aligning with the strategy Washington employed against Venezuelan crude following the ouster of President Maduro. According to The Wall Street Journal, citing an internal State Department cable sent to U.S. embassies on Tuesday, the Trump administration is now calling on other nations to join an international maritime coalition to enable more non-Iran-linked vessels to sail through the Strait of Hormuz. As global buyers turn to U.S. oil and gas producers for alternative supply to replace lost Middle Eastern capacity, U.S. crude exports surged to a record level last week. Overseas shipments jumped dramatically to over 6 million barrels per day, exceeding the previous record high of nearly 5.3 million bpd set in late 2023. Some market indicators signal that supplies are continuing to tighten. The price difference, or spread, between the December Brent futures contract and the contracts for the two preceding months widened to over $10 per barrel, compared to around $3 two months ago. Commenting on Wednesday's sharp oil price increase, Rebecca Babin, Senior Energy Trader at CIBC Private Wealth Group, said, "This feels like a day of reckoning. The paper market is catching up to the physical market, and the physical energy market has already started reflecting a tighter balance and delayed flows." The price of Brent crude futures has surged more than 60% since the full-scale conflict with Iran erupted in late February. It has persistently hovered and increasingly stabilized around $110 per barrel, moving beyond the initial wild spike seen at the war's outset. This suggests that high oil prices may be a persistent major threat, forcing investors, global central bank policymakers, and corporate leaders to confront the reality of potentially long-lasting elevated prices. Barclays recently warned that the market should not be overly optimistic about fleeting ceasefire progress, as the U.S. and Iran remain far from a genuine peace agreement. Extensions of truce agreements have not led to any substantial recovery in oil and gas transit volumes through the Strait of Hormuz. Barclays emphasized that the disruption to energy supply via the Strait of Hormuz continues to harm global energy markets. They noted that movements in stock and futures markets have not fully priced in this shock, and the scale of the supply disruption is significantly under-appreciated. The true determinant of the central trend in oil prices may no longer be solely whether active hostilities temporarily cease. Instead, it hinges on the "post-conflict repricing" of the entire energy chain: the status of the Strait of Hormuz, maritime insurance, tanker capacity, refinery repairs, and inventory rebuilding. Besides Kuwait, Iraq, Qatar, the UAE, and Saudi Arabia are also suffering to varying degrees from the closure of the Strait of Hormuz, inventory pile-ups, and damage to ports and energy infrastructure. More critically, recent research reports from commodity analysts widely stress that even if the Strait of Hormuz reopens, restoring energy flows involves more than simply reopening the strait. The challenge lies in rehabilitating the entire normalized export chain to pre-war conditions, due to issues like numerous idled tankers, full storage tanks, repairs to energy infrastructure, and the return of workers. Analysts from the international financial giant Macquarie stated in a report that if the Middle East geopolitical conflict persists through the end of the second quarter, oil prices could potentially rise to $200 per barrel.
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