Oil prices surged more than 5% on Wednesday to two-week highs after President Trump declared the fragile truce with Iran “over,” instantly reviving traders’ fears of a fresh Middle East supply shock.
By 08:32 GMT, Brent crude futures had rocketed $3.82, or 5.15%, to $77.98 a barrel, while U.S. West Texas Intermediate climbed a comparable $3.70, or 5.25%, to $74.14. Both benchmarks are now trading at levels not seen since June 23, capping a two-day surge that has added roughly 8% to oil prices.
Tuesday’s session alone saw gains of about 3% after Washington moved to revoke the general license that had permitted the sale of Iranian crude, a decisive signal that the brief thaw in U.S.-Iran relations was unraveling fast.
Speaking on the sidelines of a NATO summit in Ankara, Trump delivered the remarks that sent traders scrambling. The interim pact brokered last month to halt the war the United States and Israel launched against Iran back in February was, in his words, finished.
He added that he had no interest in further engagement with Tehran, a statement that stripped away much of the diplomatic ambiguity markets had been clinging to in recent weeks.
For a market that had only just begun to price in de-escalation, the comments landed hard. “The latest developments have effectively thrown the future of the 60-day negotiation process into doubt,” said Bjarne Schieldrop, chief commodities analyst at SEB, who argued the fundamentals no longer support the lower prices seen just days ago. “In my view, a price closer to $80 a barrel is more consistent with current market fundamentals than $70,” he said.
The geopolitical backdrop darkened further overnight. U.S. Central Command confirmed that Tuesday’s American airstrikes were carried out in direct response to Iranian attacks on three commercial vessels transiting the Strait of Hormuz, one of the world’s most critical chokepoints for seaborne energy trade.
Iran’s Revolutionary Guards claimed early Wednesday that they had retaliated by striking U.S. military installations in Bahrain and Kuwait, marking a sharp escalation that traders fear could spiral further.
Tehran has not claimed responsibility for the original vessel attacks, but Qatar has publicly pointed the finger at Iran, including for a strike on a Qatari liquefied natural gas tanker. That vessel reportedly took a hit from a drone, sparking a fire in its engine room, an incident that has rattled shippers and insurers alike.
The fallout is already visible on the water. According to PVM analyst Tamas Varga, four oil and gas tankers have either abandoned plans to transit the Strait of Hormuz or turned back entirely after Iran declared that the only “safe” shipping route through the waterway is one it designates itself, a move shippers are reading as a thinly veiled threat.
The renewed danger to tanker traffic through Hormuz is no small concern: the strait carried cargoes equivalent to roughly one-fifth of global energy supply before the war erupted in late February. Any sustained disruption there ripples far beyond regional markets, threatening supply chains from Asian refiners to European utilities.
The speed of the reversal has been striking. After the U.S. and Iran signed their truce last month, oil prices had tumbled back to pre-war levels, and traders betting the worst was behind them built up large short positions in crude futures.
Much of that bearish positioning was rooted in expectations that a wave of pent-up Middle Eastern supply, held back during the conflict, would soon flood the market.
That narrative now looks shaky. Since the fighting began, nations have been steadily drawing down their own inventories to offset the supply shortfall, leaving less of a buffer than markets may have assumed.
Compounding the tightness, U.S. crude oil inventories fell again last week, according to data from the American Petroleum Institute cited by market sources on Tuesday, a bigger draw than the roughly 2.4 million barrel decline analysts polled by Reuters had anticipated for the week ended July 3.
With short positions now vulnerable to a squeeze, the military situation escalating on multiple fronts, and the diplomatic off-ramp seemingly closed by Trump’s own words, analysts warn that oil markets could remain highly volatile in the sessions ahead.
The key question hanging over trading desks: Is Wednesday’s surge the beginning of a sustained repricing toward $80 a barrel and beyond or merely a sharp, sentiment-driven overshoot that will fade once the rhetoric cools?
For now, all eyes remain fixed on the Strait of Hormuz and on whether Tehran’s warnings to shippers translate into further vessel attacks or de-escalate as quickly as they flared.
WHAT YOU SHOULD KNOW
Trump’s declaration that the Iran truce is “over” sent oil prices surging over 5% to two-week highs, but the real threat isn’t the rhetoric; it’s the Strait of Hormuz.
With four tankers already rerouting or refusing transit and the chokepoint responsible for a fifth of global energy supply, any further disruption there, not the political back-and-forth, is what could turn this price spike into a lasting supply crisis.
