As the US-Iran conflict continues to escalate, global energy markets are repricing for a prolonged supply shock.
Brent crude oil broke through $95 per barrel during Wednesday's trading session, hitting a six-week high with a single-day gain of nearly 5%. Concurrently, both the US and Iran have clearly signaled a refusal to negotiate, pushing market expectations for a near-term ceasefire almost to zero. The rise in oil prices is no longer driven purely by supply and demand fundamentals; a geopolitical risk premium is becoming a structural anchor in the pricing system.
According to reports, on the evening of the 21st local time, the US military stated it had commenced its latest round of airstrikes against Iran, marking the 11th consecutive night of US attacks on Iranian targets. The strikes extended for the first time to military objectives near the northwestern city of Tabriz, while also targeting Abdanan and Chovar in western Iran near the Iraqi border. Iran retaliated immediately with drones and missiles, targeting US military bases in Kuwait, Bahrain, and Jordan.
An Iranian Interior Ministry spokesperson explicitly stated, "There are no negotiations at present, only the possibility of message transmission." Iranian lawmaker Qashqavi also denied former President Trump's claims that Iran is seeking talks. The surge in oil prices is already transmitting to the bond market, with US 10-year and 30-year Treasury yields rising to approximately two-month highs, leading to increased market bets on Federal Reserve interest rate hikes.
Conflict Escalation Intensifies Risk of Strait of Hormuz Blockade
The US-Iran military confrontation has entered its 11th consecutive night of exchanges, with the conflict zone continuing to expand.
The US military's expansion of strikes to Tabriz marks the first time the area has been targeted since the conflict intensified two weeks ago, signaling that the geographical scope of US bombing operations is pushing deeper into Iranian territory.
US Central Command (CENTCOM) stated that this round of strikes targeted Iranian military command centers, maritime warfare capabilities, aircraft hangars, drone storage facilities, and military logistics infrastructure, aiming to further degrade Iran's ability to threaten commercial shipping in the Strait of Hormuz. CENTCOM also claimed that since early May, US forces have assisted approximately 900 vessels carrying a total of 450 million barrels of oil through the Strait.
However, Iranian Army Commander Amir Hatami stated clearly that Iran controls the Strait of Hormuz and will fire on US forces. According to Kpler data, only three cargo ships passed through the Strait of Hormuz that day, indicating that actual shipping disruptions are far greater than official statements suggest. Meanwhile, the Iran-backed Houthi group announced it has deployed forces near the Bab el-Mandeb Strait at the southern end of the Red Sea, preparing to launch maritime attacks on ships attempting to dock at Saudi ports, posing a dual-threat of blockade to global shipping. CMA CGM, the world's third-largest container shipping line, announced it will impose an emergency fuel surcharge starting August 1.
Diplomatic Deadlock Sees Negotiation Window Effectively Close
Diplomatic mediation efforts have failed to yield any substantive progress. Iranian Interior Minister Eskandar Momeni visited Pakistan—one of the primary mediators in this conflict—on Tuesday, but tensions did not ease following the visit. The Iranian side subsequently stated the current situation is limited to "message transmission" and accused the US of violating the temporary ceasefire agreement signed on June 17, declaring the agreement "effectively a dead letter."
Former President Trump downplayed the prospects for negotiations in response to reporters' questions, stating, "They are desperate to meet, but we have no interest until they are ready to meet in a meaningful way." He also hinted that US forces might strike Iran's suspected nuclear facility at "Mount Pickaxe" and reiterated that military operations would continue. A US State Department official accused Iran on Wednesday of failing to fulfill the Strait of Hormuz agreement, stating that Iran's insistence on control over the Strait is a core obstacle to talks, but also expressed that the US remains "committed to the diplomatic path."
The Iranian side warned that if the US strikes its nuclear facilities or other sensitive infrastructure, it will respond with "forceful retaliation," and stated that if US troops set foot on Iranian soil, they would face "the full resistance of millions of people."
Energy Prices Rise Across the Board, Reigniting Inflation Pressures
The surge in oil prices is spreading to broader energy and financial markets.
Brent crude touched a high of $95.24 per barrel, while WTI crude also rose to around $88.25, with both posting single-day gains exceeding 4%. European refined fuel prices followed suit, with wholesale diesel prices climbing notably.
The natural gas market is also under pressure. The European benchmark TTF front-month contract rose to above €62 per megawatt-hour, up from less than €60 the previous day. Goldman Sachs has raised its TTF price forecasts for Q3 and Q4 to €60/MWh and €53/MWh respectively, up from previous estimates of €41 and €40, citing an expected delay in the normalization of LNG exports from the Persian Gulf to October 2026.
The rise in inflation expectations is directly impacting the bond market. The US 10-year Treasury yield climbed to 4.63%, reaching a roughly two-month high; the 30-year real yield rose to 2.93%, its highest level since 2008. Market-implied probability for a Fed rate hike in July briefly recovered to 26%. Gold prices broke through $4,100 per ounce, with silver and copper prices also rising, and short-term inflation swap rates moving higher across the board.
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