Oil surges 5% as US-Iran war escalates with Strait closure

Iran's Revolutionary Guard struck US military installations in Kuwait, Bahrain and Jordan and declared the Strait of Hormuz closed until further notice, sending Brent crude up 5% and triggering a broad risk-asset selloff that pushed gold and Bitcoin lower.

"The Strait of Hormuz closure is the most severe supply-side shock to global oil markets since the 1990 Gulf War," said Helima Croft, head of commodity strategy at RBC Capital Markets. "We're looking at a potential 20% supply disruption overnight."

The US Central Command said it struck roughly 140 Iranian targets in response, including missile and drone launch sites, while Iran's IRGC claimed hits on the Prince Hassan Air Base in Jordan, Al Udeid Air Base in Qatar and logistical facilities supporting US aircraft carriers in Oman's Duqm port. Qatar said it intercepted incoming missiles, though falling debris injured three people. The container ship M/V GFS Galaxy suffered significant engine-room damage after an IRGC strike, with one Indian crew member missing.

About a fifth of the world's traded oil and natural gas transits the Strait of Hormuz, and its closure threatens to reignite the global energy crisis that pushed crude above $120 a barrel during the war's opening phase. US President Donald Trump declared the 60-day ceasefire over but left the door open to continued negotiations, while Iran's leadership said it could sustain an "intense war" for at least six months at the current operational tempo.

Oil at the Center of the Conflict

Brent crude's 5% jump marked the largest single-day gain since the initial US-Israeli strikes on Iran in late February, when oil briefly touched $120. The spike reflects a market pricing in a prolonged supply disruption: the Strait of Hormuz carried roughly 17 million barrels per day of crude and petroleum products before the war, equal to about 21% of global consumption, according to the US Energy Information Administration.

The last comparable closure occurred in September 2019, when Iran-backed Houthi drone attacks on Saudi Aramco's Abqaiq and Khurais facilities knocked out 5.7 million barrels per day of production — roughly half of Saudi output — and sent crude spiking 15% in a single session. The current disruption is broader in scope, involving both the waterway itself and direct military strikes on US allies in the Gulf.

Risk-Off Across Asset Classes

Gold fell 1.2% to $2,345 an ounce and Bitcoin dropped 3.8% to $54,200, bucking their traditional safe-haven roles as a liquidity crunch and dollar strength drove investors toward cash. The S&P 500 futures declined 1.8% in early trading, while the VIX — Wall Street's fear gauge — surged above 32, its highest level since the war's opening days. Defense stocks including Lockheed Martin and RTX Corp. gained 3% to 5% in pre-market trading on expectations of increased US military spending.

Iran's IRGC said it had targeted "more than 200" sites linked to US and Israeli bases and facilities in the region, and claimed it could continue an "intense war" for at least six months at the current pace of operations. The US has now launched three rounds of strikes on Iranian territory since Thursday, with the latest wave hitting coastal areas near Bandar Abbas, Bushehr and Chabahar.

Diplomatic efforts led by Oman to negotiate safe passage through the strait's southern corridor in Omani territorial waters appeared to collapse after the latest escalation. Iran's Foreign Minister Abbas Araghchi had met with his Omani counterpart on Saturday to discuss "appropriate mechanisms for ensuring the safe passage of ships," but the IRGC's declaration of a full closure rendered those talks moot.

This article is for informational purposes only and does not constitute investment advice.