Brent over $120 as markets see no quick end to war

• Trump plans to keep Hormuz blockade for now
• Brent up 4.5%, WTI gains 2.3%
• Gap remains between Iranian and US positions

Brent crude prices have surged above $120 a barrel after the US rejected Iran’s latest pitch for peace and markets reckoned with expectations the Strait of Hormuz may remain impassable for a fifth of global energy supplies.

As of 03:47 GMT on Thursday, Brent futures for June were up $5.27, or 4.5 percent, at $123.30 after rising 6.1 percent in the previous session. West Texas Intermediate futures for June added $2.42, or 2.3 percent, at $109.30, after jumping 7 percent on Wednesday.

Markets are readjusting to the possibility the “gap between the Iranian and US positions” is too great to be bridged soon, said Kristian Coates Ulrichsen, Middle East fellow at Rice University’s Baker Institute for Public Policy.

“Initial assumptions of weeklong disruptions, which then turned into a month or two, are now being reassessed into many months and potentially most of the rest of 2026,” he said.

US President Donald Trump told Axios he plans to maintain his naval blockade on Iran until an agreement is found over the latter’s nuclear programme, rejecting Tehran’s proposal to reopen the strait but push nuclear talks to another day.

He has conveyed a similar message to aides and energy executives, according to the Wall Street Journal and Reuters. 

“Right now, I think there is a sinking-in of the reality that any return to normal volumes through the strait is far away and the drawdown on inventories globally is getting more serious,” said Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy.

“Prices have to go up until there is significant demand destruction.” 

Simon Henderson, of the Washington Institute for Near East Policy, said “oil can and will go higher” before Trump or the Iranians “blink”.

He predicted “pain for household budgets in many parts of the world” and “possible electoral defeats” without a prompt resolution.

After six weeks of crossfire, the US and Iran agreed a ceasefire on April 8. Their reciprocal naval blockades continue limiting Gulf exports to a trickle of Iranian-linked tankers or vessels with deactivated transponders.

The war, which started on February 28, has taken at least 11 million barrels of daily crude output offline, industry platform Kpler found. 

Saudi finance minister Mohammed Aljadaan said in mid-April that, even if the strait reopened immediately, shipping would not fully resume through at least June.  

The head of the International Energy Agency (IEA) has predicted it will take two years for damaged Gulf energy operations to return to pre-war levels, while the World Bank has projected energy prices will climb 24 percent this year to their highest since Russia’s invasion of Ukraine in 2022. 

Further reading:

• LNG tanker crosses Hormuz for first time since start of war
• Frank Kane: Who are the real targets of Trump’s war on Iran?
• Worldwide oil inventories could sink to record lows

As buffers are worn down, and absent a deal, Brent could rise well above $120, said Ben Cahill, a non-resident fellow at the Arab Gulf States Institute.

“The stress on refined products that started in Asia will spread, including for jet fuel,” he said. “Recession risk is rising.”

To reduce domestic consumption, Bangladesh has limited air-conditioning use, Egypt restrained travel by public officials and Peru shifted schools online, among other measures governments have taken, according to an IEA tracker.  

Global demand for oil is slated to fall in 2026 for the first time since the pandemic, the Paris-based agency has said. 

The UAE said on Tuesday it would exit the Organization of the Petroleum Exporting Countries for the freedom to hike future production, but analysts do not expect this to lower prices in the short term.

Trump praised the Emirati decision, calling it “a good thing for getting the price of gas down, getting oil down, getting everything down”.