Oil Prices Surge Again as US-Iran Tensions Escalate

Oil prices climbed further on Tuesday after fresh US strikes on Iran deepened fears over a fragile ceasefire and raised concerns about renewed inflation pressures. Tech stocks, meanwhile, found some relief following recent heavy selling, though they only recovered part of the losses triggered by growing worries over an overheated AI boom.

The latest escalation began after Iranian forces struck a commercial vessel in the Strait of Hormuz early on Sunday, a waterway carrying roughly a fifth of the world’s oil supply, before announcing its closure. In response, the US launched strikes on sites inside Iran, prompting Tehran to retaliate with attacks on targets in Bahrain, Jordan, Kuwait and Oman.

Before the latest US action, President Donald Trump told conservative radio host Hugh Hewitt, “we’re going to hit them very hard tonight, and we’re going to hit them hard tomorrow.” He later posted on Truth Social that the United States would become “known as ‘THE GUARDIAN OF THE HORMUZ STRAIT'” and announced a 20 per cent fee on all cargo passing through the strait. While Iran’s ports would remain blockaded, Trump insisted “all other countries will have fair and open use of the strait.” Speaking to reporters in the Oval Office, he added that a deal with Tehran remained possible: “Yeah, I think a deal is possible. Sure, I do. We had a deal with them two days ago and then they said ‘Oh we can’t make that deal. We have to negotiate it further.'”

Oil prices jumped more than nine per cent on Monday amid fears of wider conflict and concerns that renewed inflation could push the Federal Reserve and other central banks toward interest rate hikes. Prices climbed further on Tuesday, adding more than one per cent. Jason Wong of BNZ commented, “With Trump, one never quite knows how seriously to take such pronouncements, but Gulf allies would not be pleased with this plan, and it almost certainly violates international law.” He noted that the proposed 20 per cent levy would add roughly $16 to the cost of every barrel moved through the strait aboard a typical supertanker, adding that the plan may not hold and could simply be a negotiating tactic aimed at pressuring Iran to halt its strikes on shipping.

Equity markets mostly climbed through the day, though confidence remained shaky as traders questioned whether the AI-driven rally had run too far. Seoul saw the most dramatic swings, dropping as much as five per cent before closing in positive territory. SK hynix rose more than three per cent, a day after plunging 15 per cent. Its New York-listed shares, which had soared over 13 per cent on their Friday debut, sank more than nine per cent on Monday. Rival Samsung gained 3.3 per cent. Tokyo, Hong Kong, Shanghai, Singapore, Manila and Jakarta also posted gains, while Wellington, Taipei, Mumbai and Bangkok slipped. London, Paris and Frankfurt opened lower.

Investors are now bracing for a pivotal week, with earnings season beginning, Fed chair Kevin Warsh scheduled to testify before Congress, and fresh US inflation data due for release. Fed governor Christopher Waller added to rate-hike concerns, stating on Monday, “If we get another hot reading on core inflation this week, then the [rate-setting committee] will need to consider tightening monetary policy in the near term.”

Market figures showed West Texas Intermediate up 2.6 per cent at $80.15 a barrel, while Brent North Sea Crude rose 2.4 per cent to $85.37 a barrel. In Asia, Tokyo’s Nikkei 225 closed up 0.7 per cent at 67,743.50, Seoul’s Kospi gained 0.7 per cent to 6,856.83, Hong Kong’s Hang Seng Index rose 0.6 per cent to 24,352.92, and Shanghai’s Composite climbed 1.4 per cent to 3,967.13. In Europe, London’s FTSE 100 fell 0.3 per cent to 10,464.94. The euro strengthened to $1.1389 from $1.1384, the pound rose to $1.3358 from $1.3353, and the dollar slipped against the yen to 162.34 from 162.43. The euro also edged up against the pound to 85.27 pence from 85.25 pence, while New York’s Dow closed down 0.3 per cent at 52,498.64.

How much further do you think oil prices could rise if tensions between the US and Iran continue to escalate?