US and Iran Exchange Fire in Hormuz Strait, Brent Crude Jumps to $103 a Barrel
Oil prices saw a significant increase on Friday following an exchange of fire between US and Iranian forces within the Strait of Hormuz. The US military stated its actions were in self-defence, responding to what it termed “unprovoked” Iranian attacks as US vessels navigated the critical waterway. Conversely, Iranian state media reported that the US had breached the April ceasefire agreement.
Global Oil Market Reacts to Hormuz Clashes
The global Brent crude benchmark price rose by nearly 3%, briefly touching $103 a barrel, before receding to approximately $100. This spike underscores the market's sensitivity to disruptions in the Strait of Hormuz, a conduit for over a fifth of the world's oil and gas, which has faced effective blockades since the commencement of the US-Israel war with Iran. Prior to the conflict, oil traded at roughly $70 a barrel.
US President Donald Trump affirmed that the US-Iran ceasefire remained in place despite the clashes, which he described as involving three US destroyers. He claimed several Iranian small boats were “completely destroyed” and incoming missiles “easily knocked down.” Iranian military sources, however, alleged US aerial attacks along the coastline, prompting their forces to respond and inflict “significant damage” on US vessels, a claim denied by US Central Command, which stated it was not seeking to escalate the conflict.
Negotiations Continue Amid Tensions
Trump also indicated ongoing negotiations with Iran, reiterating Washington's demand that Tehran forego nuclear weapons. “The talks are going very well, but they have to understand if it doesn't get signed, they're going to have a lot of pain,” Trump told reporters. Analysts characterise the existing ceasefire as “fragile,” with market reactions reflecting this uncertainty despite official efforts to downplay tensions.
Beyond oil, the conflict has driven up prices for products such as jet fuel, which has increased by roughly 50%. IAG, the owner of British Airways, projects its fuel costs will reach €9bn this year, an increase of approximately €2bn from the previous year. The airline group's shares declined by over 5% in early London trading, reflecting investor apprehension.
