West Texas Intermediate (WTI) crude oil prices remained steady above $103.00 per barrel on Tuesday, hovering near four-week highs, as markets braced for US President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz at 8 PM Eastern Time (00:00 GMT Wednesday) [1][3][5]. Attempts to push WTI above $105.00 have been capped by the looming deadline and heightened geopolitical uncertainty [1]. The closure of the Strait, a critical gateway for about 20% of global crude supply, in the first week of the US-Israel-Iran conflict triggered a roughly 50% surge in crude prices, with WTI peaking at $113.28 on March 9 from about $67.00 before the war [1]. Brent crude has also soared, with Societe Generale analysts noting Dated Brent at $141/bbl, reflecting severe physical tightness as Strait flows remain impaired [2]. Their scenario analysis suggests Brent could average $125/bbl in April under a controlled escalation, but could exceed $200/bbl if the conflict intensifies and regional chokepoints like Bab el-Mandeb are closed [2].
Diplomatic efforts have faltered, with both the US and Iran rejecting a 45-day ceasefire plan proposed by Pakistan. Iran’s subsequent 10-point peace proposal was deemed “significant” but insufficient by Trump, who reiterated threats of “total demolition” of Iranian bridges and energy plants if his demands are not met [1][3][5]. In response, Iran warned it would escalate attacks on energy assets in the Gulf if US strikes target civilian infrastructure, further straining global energy supplies [3]. Meanwhile, Israel has attacked Tehran, and Iran has launched missiles at Israel and Saudi Arabia, reportedly without casualties [1].
The market reaction has been pronounced. US stock futures declined, with Dow Jones futures down 0.2%, S&P 500 futures off 0.34%, and Nasdaq 100 futures falling 0.45% as traders adopted a risk-off stance ahead of the deadline [3]. Risk aversion has increased due to surging energy prices and inflation fears, prompting expectations that the Federal Reserve will keep rates steady, with a 99.5% probability of no change at the April meeting according to CME Group’s FedWatch Tool [3]. The US Dollar Index (DXY) remains supported, trading in a 100.00-100.50 range, as investors seek safe havens amid geopolitical uncertainty [4]. ING analysts suggest that further oil price increases could lead markets to price in potential Fed hikes, especially if US economic data remains strong [4].
Currency markets have also responded, with the US Dollar strengthening against the Canadian Dollar (USD/CAD trading around 1.3915), as Middle East tensions and higher oil prices drive safe-haven flows [5]. While rising crude prices typically support the oil-linked Canadian Dollar, the current risk-off environment and US dollar strength have outweighed this effect [5].
OPEC+ recently agreed to increase output quotas by 206,000 barrels per day in May, but this measure is contingent on the reopening of the Strait of Hormuz [1]. Societe Generale analysts project that even with eventual normalization, countries will likely expand strategic stockpiling, providing ongoing price support and only gradual normalization of inventories into late 2026 [2].
CONCLUSION
Escalating US-Iran tensions and the closure of the Strait of Hormuz have driven oil prices sharply higher, with both WTI and Brent trading near multi-year highs. Markets are on edge ahead of President Trump’s deadline, with risk aversion fueling a stronger US Dollar and weaker equities. The outlook remains highly uncertain, with analysts warning of further price spikes and prolonged market disruption if the conflict intensifies.