The global oil price surged past $126 a barrel on Thursday, its highest level since 2022, after US President Donald Trump indicated the naval blockade of Iranian ports could persist for months amid stalled peace talks. Brent crude futures rose more than 13% in 24 hours, reaching levels not seen since Russia's invasion of Ukraine, when prices peaked at $139.
Markets have been spooked as Trump appears willing to maintain the blockade, with Iran responding by keeping the Strait of Hormuz all but closed to oil tankers. Analysts suggest traders are losing hope for a quick diplomatic resolution. 'The breakdown of talks... has the market losing hope for any quick resumption in oil flows,' said Warren Patterson, head of commodities strategy at ING.
Trump told oil executives this week that the US would 'continue the current blockade for months if needed,' according to a White House official. The blockade aims to force Iran to cap its oil wells once storage facilities fill up. 'They are choking like a stuffed pig,' Trump told Axios.
The sharp rise in oil prices raises the risk of a global recession driven by higher fuel and feedstock costs. Economist Paul Krugman warned that a prolonged Hormuz crisis could trigger a full-on global recession. Meanwhile, UK gilt yields hit a post-2008 high of 5.07%, and a thinktank estimates a £35bn economic hit for Britain.
Without a resolution, oil prices could return to 2008's record highs of $147, or even $200 as Tehran has warned. The price later eased to around $114 a barrel on Thursday afternoon.
