Global energy markets convulsed on Thursday, with crude oil benchmarks soaring to seven-month highs amid U.S.-Iran tensions that imperil vital supplies. Investors rushed into gold as a bulwark against uncertainty, propelling the metal beyond $5,000 per troy ounce.
Brent crude rose 1.86 per cent to $71.66 per barrel. U.S. West Texas Intermediate gained 1.9 per cent to $66.43. Wednesday’s 4 per cent jump was the largest since October.
Gold climbed 2 per cent Wednesday to reclaim $5,000, then added 0.2 per cent Thursday. It has traded like a meme stock lately, though Middle East risks restored its haven status.
U.S. and Iranian envoys met in Geneva this week on nuclear issues. Vice President JD Vance said Iranians ignored President Trump’s “red lines.”
U.S. forces moved nearer the Middle East. Focus fell on the Strait of Hormuz, handling 20 million barrels daily or 20 per cent of global use. Iran then partially closed it for drills.
“The latest move [in oil prices] signals a market strengthening an already notable geopolitical risk premium as the world’s most important oil artery once again sits within striking distance of a conflict,” Ole Hansen of Saxo Bank said in a note.
“The renewed geopolitical tension between the U.S. and Iran is now clearly feeding into prices,” Daniela Hathorn of Capital.com said in a note.
Unlike Venezuela’s limited impact post-Maduro capture, Iran’s 1.5 million barrels daily output via the strait alarms markets. China depends on it heavily.
“In energy markets, probabilities matter, especially when the potential disruption involves a major oil producer and a critical global transit route,” Hathorn said.
“Oil markets are starting to price in higher risk as Iran remains a major producer, and more importantly, sits at the heart of the Strait of Hormuz,” she said. “Even limited disruption or credible threats to shipping lanes could cause an immediate supply shock.”
Supply shocks could spike inflation, curbing rate cuts. “More immediately, strikes on Iran would risk causing oil prices to jump and threaten to boost inflation in much of the world, reducing the pace or number of interest rate cuts by major central banks,” Capital Economics analysts wrote.
U.S. equities closed lower amid the unease. The Dow Jones shed 0.54 per cent, the S&P 500 declined 0.28 per cent, and the Nasdaq Composite slipped 0.31 per cent.
“Given that inflation and affordability are front and center for the White House right now, we’d have to think that protecting the flow of oil through the Strait of Hormuz is a priority, meaning that the priority is a diplomatic solution, and if that is not possible, then a military plan that protects the flow of oil as much as possible,” Dennis Follmer of Montis Financial said in a note.
June’s Israel-Iran clashes and U.S. strikes lifted oil 8 per cent, as fears eased without the Hormuz blockade.