Brent crude oil futures experienced a dramatic intraday swing on Thursday, briefly surpassing $126 a barrel for the first time in four years before retreating sharply. The June contract settled $2.05 lower at $115.98 per barrel by 1016 GMT, as traders digested the possibility of new U.S. military operations against Iran and persistent concerns over Middle East supply disruptions.
The earlier spike above $126 came amid reports that President Donald Trump is considering a range of military options, including a targeted strike campaign and a potential naval operation to reopen the Strait of Hormuz. The narrow waterway between Iran and Oman is a critical chokepoint for global energy markets, with roughly 20 million barrels per day of crude and refined products transiting the strait in 2025, according to the International Energy Agency. That volume represents nearly a quarter of all seaborne oil trade worldwide.
PVM oil broker Tamas Varga noted the subsequent decline lacked an obvious catalyst, describing it as “the unpredictable nature of trading in a Trump world.” The volatile price action underscores the heightened sensitivity of oil markets to geopolitical developments in the region.
Axios reported that President Trump was scheduled to receive a briefing from CENTCOM commander Adm. Brad Cooper, reviewing fresh options for addressing the situation. Among the proposals under consideration are a “short and powerful” bombing campaign and a plan to seize a portion of the Strait of Hormuz to restore commercial shipping traffic. Trump told Axios that the naval blockade approach was “somewhat more effective than the bombing.”
Diplomatic efforts are also underway, with Washington seeking international backing for its Maritime Freedom Construct initiative. A State Department cable reviewed by Reuters describes the proposal as a “post-conflict maritime security architecture” aimed at reopening the strait. The State Department would lead diplomatic outreach, while CENTCOM would manage real-time maritime traffic coordination.
On the domestic front, President Trump met this week with Chevron CEO Mike Wirth and other top energy executives to discuss oil production, natural gas, shipping, and futures market dynamics. The administration is seeking to maintain pressure on Tehran without causing significant pain at the pump for U.S. consumers ahead of the November midterm elections.
West Texas Intermediate crude, the U.S. benchmark, also felt the impact, reaching $108.28 earlier in the session before pulling back. Notably, Brent crude was trading near $70 per barrel before the conflict escalated in late February. The rapid price surge has reignited fears of stagflation — a toxic combination of sluggish economic growth and stubbornly high inflation. Mike Bell of RBC BlueBay warned that recession probabilities in Europe, the U.K., and parts of Asia are “higher than is priced into equity markets.” Citi estimates that if Brent holds at $120 through year-end, global growth could slow to between 1.5% and 2%, with headline inflation climbing toward 5%.
International Energy Agency chief Fatih Birol described the situation as “a major economic and energy challenge,” noting that crude above $120 is already squeezing economies worldwide. The political pressure in Washington is also intensifying. Defense Secretary Pete Hegseth endured nearly six hours of questioning at the House Armed Services Committee on Wednesday and was scheduled for additional testimony before the Senate Armed Services Committee on Thursday, with Democrats focusing on the war’s costs and strategy.
Stephen Jen of Eurizon SLJ offered a more tempered view, noting that the U.S. is less vulnerable to oil shocks than during the 1970s due to lower oil intensity and greater hydrocarbon self-sufficiency. However, he cautioned that if prices surged toward $200, even that resilience might not hold. The market remains on edge, with Deutsche Bank’s Jim Reid highlighting “growing fears about an extended stagflationary shock” as fuel costs begin to seep into bond yields and inflation expectations.
