The price of oil surged to its highest point since July 2022 on Sunday evening, driven by escalating tensions in the Middle East. The Trump administration indicated that the ongoing conflict with Iran may extend for several more weeks. President Donald Trump, seeking international assistance, called for support in reopening the vital Strait of Hormuz, a crucial passage for oil tankers.
Brent crude, the global oil benchmark, saw an increase of 2.9%, reaching approximately $106.12 a barrel, while U.S. oil prices climbed 2.6% to around $101.53. The conflict, now in its third week, has resulted in significant disruptions to the oil market. The Strait of Hormuz, a critical shipping lane that facilitates around 20% of the world’s oil supply, has been largely inaccessible for tankers since the war’s inception.
Despite efforts by the Trump administration to reassure stakeholders regarding shipping routes, President Trump announced plans to deploy naval forces to escort and protect oil tankers departing from the Middle East. However, officials acknowledged that it could take weeks for the Navy to gear up for this mission. In a statement on Truth Social, Trump urged other nations to collaborate on reopening the Strait to ensure the swift restoration of oil flow.
Oil prices typically experience greater volatility during after-hours trading, with speculators adjusting their positions amid lower trading volumes. In the previous week, oil nearly hit $120 a barrel during after-hours but settled near $100 the following Monday.
Meanwhile, tensions have escalated with Iran, which has reportedly laid mines in the Strait and threatened to target any U.S.-linked oil and gas infrastructure. Since the conflict began, several tankers have been attacked in the strategic waterway. The United States has implemented strikes on Kharg Island, a key area for Iran’s oil production, yet has refrained from targeting the country’s oil output directly.
In a bid to mitigate the impact of rising oil prices, the U.S. administration is also moving to boost domestic production. The approval of a new BP project off the Gulf Coast marks the company’s first new initiative since the catastrophic Deepwater Horizon incident. Additionally, Energy Secretary Chris Wright has instructed Sable Offshore Corp. to restart its oil rigs and pipelines off Southern California.
In parallel, the International Energy Agency (IEA) announced on Wednesday a collective agreement for member countries to release 400 million barrels of emergency oil. This decision represents the largest coordinated action by the agency, although the oil from the Americas and Europe is not expected to be available until the end of March.
The rise in oil prices has translated to higher gasoline costs in the United States, with prices climbing 24% to an average of $3.70 per gallon since the onset of the conflict, according to AAA. This increase poses a significant challenge for Trump, as it undermines one of his key accomplishments of lower gas prices during his second term, particularly as they had recently dipped below $3 a gallon — the lowest level since May 2021.
Beyond oil, the closures at the Strait of Hormuz have broader implications. Farmers globally depend on fertilizers shipped through this critical route, which could lead to increased grocery prices. Additionally, the cost of perishables—including dairy, fruits, vegetables, and fish—may become affected as shipping disruptions continue to mount.
