Oil surges 5% as shipping gauge jumps 20% on renewed Iran tensions

Oil prices surged about 5% on Wednesday and a closely watched measure of shipping costs jumped four times as much after President Donald Trump declared the Iran ceasefire "over" and US forces struck more than 80 military targets in southern Iran.

"These reckless attacks have again placed innocent seafarers in grave danger," Arsenio Dominguez, secretary general of the International Maritime Organization, said in a statement. Almost 6,000 crew members remain stranded in the Gulf, the IMO said.

Brent crude rose as much as 8% to $80.12 a barrel before paring gains, while West Texas Intermediate climbed 7.7% to $75.83. Tanker freight rates for routes transiting the Strait of Hormuz surged about 20%, reflecting the market's assessment that the waterway — through which roughly one-fifth of the world's oil supply passes — faces sustained disruption risk.

The breakdown of the ceasefire threatens to reignite a conflict that had shown signs of cooling after the Islamabad Memorandum of Understanding. Iran's foreign ministry blamed the US for the escalation, saying Washington's strikes and renewed oil sanctions had made key parts of the agreement "ineffective." With no clear path back to negotiations, traders are pricing in a prolonged risk premium on both crude and maritime transport.

The US Treasury on Tuesday revoked a waiver that had temporarily lifted oil sanctions on Iran, calling Tehran's actions in the Strait of Hormuz "wholly unacceptable." The license, announced in June, had allowed Iran to produce, sell and deliver crude oil through Aug. 21. The revocation effectively reimposes the full sanctions regime that had been suspended under the ceasefire framework.

Iran's Islamic Revolutionary Guard Corps said it struck 85 US military targets in Bahrain and Kuwait in retaliation, while claiming to have shot down a US MQ-9 Reaper drone. Kuwait's armed forces said they intercepted two ballistic missiles and 13 drones that breached the country's airspace early Wednesday, with no casualties reported. Bahrain activated warning sirens for the second time that morning as Iran's military warned all American bases in the region would be considered legitimate targets.

The escalation has broad economic implications beyond energy markets. The CoBank Quarterly report published Wednesday noted that inflationary pressures triggered by the Iran conflict are continuing to impact many sectors of the US economy. US food prices are up 2.7% from a year ago and roughly 26% higher than five years ago, the report said, with consumers trading down to cheaper options. Higher diesel prices following the Iran war have already given additional support to biofuel feedstocks like soybean oil, the report noted.

Asian equity markets fell sharply, with Japan's Nikkei 225 dropping 2.1% and South Korea's Kospi tumbling 5.4%. India's Nifty 50 index slid 2% as the rupee weakened 20 paise to 95.16 against the dollar. European shares also declined as investors weighed the risk of sustained higher energy costs. The dollar index edged up 0.06% to 101.08, reflecting a modest flight to safety.

The last time the Strait of Hormuz faced a comparable disruption threat was during the 2019 tanker attacks, when oil prices spiked about 15% over two weeks before stabilizing. The current episode involves direct US-Iran military exchanges, making the risk of a prolonged closure more acute. With Iran insisting vessels use routes designated by Tehran and the US vowing further strikes if attacks continue, shipping companies face the prospect of weeks or months of disrupted transit through the world's most important energy chokepoint.

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