The prospect of a widening war in Iran sent oil markets into a frenzy on Thursday, with crude prices briefly touching levels not seen since Russia invaded Ukraine, as reports emerged that the United States military has drawn up plans for a fresh wave of strikes that could deepen one of the most consequential energy crises in recent memory.
For Seattle-area drivers already paying some of the highest gas prices in the country, the news could not have come at a worse time.
Brent crude climbed nearly 7% to $126.31 a barrel at its peak on Thursday, a number that rattled investors, energy executives, and policymakers on both sides of the Atlantic. The catalyst was a report from news site Axios, which cited anonymous sources saying US Central Command has developed plans for a series of “short and powerful” strikes on Iran designed to break the deadlock in negotiations that have so far failed to produce any movement. A separate plan, also cited by Axios, would involve seizing a portion of the Strait of Hormuz to force it back open for commercial shipping, a move that could require troops on the ground.
Prices pulled back later in the session to around $114, partly because the June Brent futures contract expired Thursday, pushing trading activity to the July contract, which settled near $110. But the brief spike was enough to send a clear signal about how fragile the market has become. Senior oil analyst Naveen Das of Kpler told the BBC that $125 per barrel is the level where businesses and politicians “start to get a bit more jittery,” and said escalation in the war appears firmly back on the table.
At the heart of the energy crisis is the Strait of Hormuz, the narrow waterway through which roughly a fifth of the world’s oil and liquefied natural gas normally flows. The strait has been effectively closed since the conflict between the US, Israel, and Iran began on 28 February. Iran threatened to attack vessels attempting to use the waterway in retaliation for airstrikes, and the US responded by announcing a blockade of Iranian ports. Iran’s Supreme Leader Mojtaba Khamanei issued a statement Thursday pledging that Tehran would secure the strait and eliminate what he described as enemy abuses of the waterway, offering little indication that a diplomatic resolution is imminent.
The consequences of a prolonged closure are already being felt far beyond the pump. Airlines have begun raising fares and cutting routes. Fertiliser prices have surged as urea shipments through the strait have been blocked, threatening to push food costs higher across global supply chains later this year. Investment manager Will Walker-Arnott of Raymond James framed the central question bluntly: “The big question in my mind is how long the Trump administration can stand the economic heat.” Energy executives met with Trump on Tuesday to discuss limiting the war’s impact on American consumers, a meeting that itself deepened market anxiety about how long the disruption could last.
In Washington state, where drivers were already paying an average of $5.38 per gallon before Thursday’s price spike, the trajectory is pointing in one direction. King County continues to record the highest pump prices in the state, averaging $5.68 per gallon. Each jump in global crude prices flows through quickly to what Seattle-area residents pay at the pump, and with no resolution to the Hormuz closure in sight, relief remains elusive.
Analysts warned the inflationary effects will not stay contained to energy. “The worry is that all these costs will be passed on through supply chains, pushing up the price of everyday goods, later in the year and into next year,” said Susannah Streeter, chief investment strategist at Wealth Club. Stock markets in Asia closed lower on the news, while European indices edged higher, with London’s FTSE 100 closing up 1.6% and Germany’s Dax rising 1.4%.
