US oil futures surged past $110 a barrel and are now trading above Brent crude, as markets reacted sharply to the possibility of further military action and continued disruption in the Strait of Hormuz.
Earlier, Brent crude prices had reversed losses and were above $105 after declining 1.8% to $99.37 a barrel, following a 2.7% drop on Wednesday.
Trump delivered a rare prime-time address to the US at 9 pm (local time), saying it has been one month since the US military operation “Epic Fury” began. He said Iran’s navy is gone, its air force is in ruins and its leaders are dead.
He said he wanted to discuss why the operation is necessary and added that US objectives in Iran are “very simple and clear,” with core strategic operations in Iran nearing completion.
Trump said the short-term increase in gas prices is solely due to Iran’s attack on its neighbours. He added that the US will “finish the job pretty soon” in Iran.
He also said that countries that cannot get fuel should “build up some courage” and “just take the Strait of Hormuz,” adding that countries must take care of the strait themselves.
Trump said the US is going to hit Iran “extremely hard” in the next two to three weeks and that the US has its eyes on key targets in Iran. If there is no nuclear deal, the US will strike those targets, he said.
He concluded by saying the US is on the “cusp of ending Iran’s threat to the world.”
The Iran war has effectively closed the Strait of Hormuz, choking off commodity supplies such as crude, gas and products like diesel to global markets, driving energy prices higher and raising fears of an inflation crisis.
Meanwhile, oil futures had declined in recent days, although the international benchmark was still around 40% higher than before the war. However, the latest escalation pushed US oil futures sharply higher, sending them above $110 per barrel and above Brent crude.
The prospect for a resolution had earlier injected optimism into wider markets, but International Energy Agency Executive Director Fatih Birol warned that energy rationing may be coming soon to some countries as the oil supply shock deepens this month. Filling stations in France and Australia have already run dry.
The standoff over the Strait of Hormuz remains the most pressing issue for energy markets. On Monday, Trump said the US would blow up Iranian infrastructure, including power plants if the strait doesn’t reopen, but on Tuesday he called on other nations to wrest control of the waterway. The United Arab Emirates is among Gulf nations calling on the United Nations to authorize force to reopen it.
Iran and Oman will decide the future of the strait, Iran’s Foreign Minister Abbas Araghchi said on Wednesday, according to state-run media. Hormuz won’t be opened based on the “absurd displays” of the US president, state-run IRIB added, citing a statement by the Islamic Revolutionary Guard Corps.
With inputs from Bloomberg
