Oil prices rallied sharply on Friday following an exchange of fire between the United States and Iran in the Strait of Hormuz, raising concerns about the stability of a fragile ceasefire and the security of one of the world's most critical oil shipping routes [1]. International benchmark Brent crude futures for July delivery climbed 2.26% to $102.32 per barrel, while U.S. West Texas Intermediate futures for June delivery increased 2.06% to $96.76 per barrel [1].
Both Washington and Tehran accused each other of initiating the attacks, further straining a ceasefire agreement that has already been weakened by repeated allegations of violations [1]. The incident occurred as Iran was reportedly reviewing a U.S. proposal to end the ongoing war [1]. Despite the escalation, U.S. President Donald Trump insisted in a call with an ABC News reporter that the ceasefire remains in effect, characterizing the strikes as "just a love tap" [1]. Trump also stated on Truth Social that U.S. forces had destroyed the Iranian targets involved, including small boats and drones, and warned of further military action if Iran does not agree to a nuclear deal [1].
Market optimism regarding a potential reopening of the Strait of Hormuz diminished after reports indicated that Washington was preparing to resume naval operations to escort commercial vessels through the waterway [1]. ANZ Research noted that oil prices experienced a "rollercoaster rise" as doubts grew over the prospects for U.S.-Iran peace negotiations [1]. Subsequently, President Trump paused "Operation Freedom," the U.S. naval mission aimed at escorting commercial vessels [1].
ANZ Research experts commented that the risk of the proposed U.S. peace deal collapsing will likely keep oil markets volatile [1]. Citi analysts projected that broader financial markets may stabilize despite recent volatility linked to the Middle East, but cautioned that the path to normalization is unlikely to be smooth and could keep oil prices elevated in the coming months [1].
CONCLUSION
The exchange of fire between the U.S. and Iran in the Strait of Hormuz has reignited fears of supply disruptions, sending oil prices higher and increasing market volatility. While some analysts expect eventual stabilization, the ongoing geopolitical tensions and uncertainty surrounding peace negotiations are likely to keep oil markets on edge in the near term.