Oil prices soared on Wednesday after reports emerged that the United States is preparing for an 'extended' blockade of Iran. Brent crude rose to over $117 per barrel, the highest level this month, up from just over $110 on Tuesday evening.
BBC News understands that US oil giant Chevron met with President Donald Trump at the White House on Tuesday to discuss how to limit the fallout from the conflict on American consumers. Other energy executives were reportedly also in attendance. Oil traders interpreted the meeting as a sign that the effective closure of the Strait of Hormuz will continue for a prolonged period.
According to the Wall Street Journal, President Trump has instructed aides to prepare to extend the ongoing blockade of Iran's ports in an effort to squeeze the country's economy. Iran has said it will continue to disrupt traffic through the Strait of Hormuz in response to the US blockade. The strait, which normally carries about a fifth of the world's oil and liquefied natural gas supply, has been effectively closed for weeks due to the conflict.
Earlier this month, Tehran warned that any vessel approaching the strait would be targeted. The US then announced its forces would intercept or turn back vessels traveling to or from Iran's ports. Analysis by BBC Verify shows at least four vessels tracked from Iranian ports appear to have crossed the US blockade line.
Despite recent fluctuations, oil prices remain significantly higher than pre-conflict levels. Brent crude dropped to $90 a barrel on April 17 after a ceasefire between Israel and Lebanon was announced, but has since risen steadily over the last 12 days as the US continued its blockade.
Lindsay James, investment strategist at Quilter, said the war's impact on the UK has so far been largely limited to higher petrol and diesel prices, but 'every day that passes without a resumption of supply sees the risk of physical shortages and steeper price rises on a range of goods increasing.'
The Iranian economy is facing a deepening crisis, with rapidly rising prices, a falling currency, and the prospect of oil exports grinding to a halt. The Statistical Center of Iran reports annual inflation at 53.7%. The rial has fallen to a record low. The Iranian government said last week that around two million Iranians have lost their jobs directly or indirectly as a result of the war.
On Wednesday, Trump urged Iran to 'get smart soon' and sign a deal, following days of deadlock. In a post on Truth Social, Trump said the country 'couldn't get its act together.' The Wall Street Journal cited US officials saying Trump had opted to continue squeezing Iran's economy with the blockade, as other options—resuming bombing or walking away—carried more risk.
The World Bank on Tuesday forecast energy prices would surge by 24% in 2026 to their highest level since Russia's full-scale invasion of Ukraine four years ago, if the most acute disruptions caused by the Iran war end in May.
European stocks fell on Wednesday: the FTSE 100 was down 1.2%, the pan-European Stoxx index down 0.69%, France's CAC down 0.5%, and Germany's Dax down 0.36%. Asian stock markets mostly rose. Kathleen Brooks, research director at XTB, said: 'Financial markets will now need to price in the prospect of a prolonged blockade.'
Source: www.bbc.com