Oil prices have done that thing they do when geopolitical tensions flare up - they've shot upward, because of course they have. Brent crude surged past $117 (£86.71) a barrel on Wednesday afternoon, marking the highest price so far this month, up from just over $110 on Tuesday evening. The cause? Reports that the US is digging in for an 'extended' blockade of Iran, because nothing says 'let's de-escalate' like a prolonged naval stare-down.
BBC News understands that US oil giant Chevron met President Donald Trump at the White House on Tuesday to strategize about how to keep American consumers from feeling too much of the sting. Oil traders, ever the optimists, took this meeting as a sign that the effective closure of the Strait of Hormuz - which usually carries about a fifth of the world's oil and liquid natural gas - will continue for a while. Because nothing says 'we've got this' like calling in the execs.
According to reports from Washington, other energy executives also joined the pow-wow. This follows separate reports from the Wall Street Journal that Trump has instructed aides to prepare to extend the ongoing blockade of Iran's ports, in an effort to squeeze the country's economy even tighter. Iran, for its part, has said it will keep disrupting traffic through the Strait of Hormuz in response. A diplomatic dance as old as time, really.
The price of oil has been on a rollercoaster since the conflict began, with the Strait of Hormuz effectively closed for weeks. Iran severely restricted shipping after US and Israeli strikes started on 28 February, and earlier this month Tehran warned that any vessel approaching the strait would be targeted. The US responded by announcing it would intercept or turn back vessels heading to or from Iran's ports. Analysis by BBC Verify shows at least four vessels from Iranian ports appear to have crossed the US blockade line, proving that blockades are leakier than a sieve in a storm.
Despite the recent fluctuations, oil remains much higher than the pre-conflict price. Brent crude briefly dipped to $90 a barrel on 17 April after a ceasefire between Israel and Lebanon was announced, and the US paused attacks on Iran on 8 April. But the benchmark has been climbing steadily over the last 12 days as the blockade continued. Lindsay James, investment strategist at Quilter, notes that the impact in the UK has so far been limited to higher petrol and diesel prices, but 'every day that passes without a resumption of supply sees the risk of physical shortages and steeper price rises on a range of goods increasing.' So, yay, more expensive everything.
Meanwhile, the Iranian economy is having a terrible time. The annual inflation rate has hit 53.7%, according to the Statistical Center of Iran. The rial has fallen to a record low. Around two million Iranians have lost their jobs, directly or indirectly, due to the war, the Iranian government said last week. On Wednesday, Trump took to Truth Social to urge Iran to 'get smart soon' and sign a deal, adding that the country 'couldn't get its act together.' Diplomacy, 2025 style.
The Wall Street Journal cited US officials saying Trump instructed aides to prepare for an extended blockade to force Tehran's hand, as his other options - resuming bombing or walking away - carried more risk. Iranian officials said on Tuesday they could withstand the blockade using alternative trade routes. The World Bank forecast on Tuesday that energy prices would surge by 24% in 2026 to their highest level since Russia's full-scale invasion of Ukraine four years ago, if the most acute disruptions from the Iran war end in May. That's a lot of 'ifs.'
European stocks fell on Wednesday as investors digested corporate earnings and awaited the US Federal Reserve's interest rate decision. The FTSE 100 was down 1.2%, the pan-European Stoxx index dropped 0.69%, France's Cac fell 0.5%, and Germany's Dax slipped 0.36%. In the US, the Nasdaq made marginal gains while the S&P was 0.15% down on opening. Asian stock markets mostly rose, continuing their recovery from the initial war shock. Kathleen Brooks, research director at XTB, summed it up: 'Financial markets will now need to price in the prospect of a prolonged blockade.' Because uncertainty is the spice of market life.