IRGC threatens Strait of Hormuz as oil faces 21% supply risk

Iran's IRGC threatened a "decisive" response to any disruption of the Strait of Hormuz on Thursday, escalating a standoff that has already pushed crude prices higher and disrupted global energy trade through the critical chokepoint.

"The Strait is going to be open to everybody. It's international waters and Oman will behave just like everybody else or we'll have to blow them up," President Donald Trump told reporters at the White House on Wednesday, according to a TIME report. Trump's comments came after Iranian state media reported that Oman and Iran were in talks to jointly manage shipping through the waterway.

The US military carried out strikes on a military site in Iran's Bandar Abbas on Wednesday, a US official told Reuters, after shooting down four Iranian attack drones threatening the Strait. Iran's IRGC retaliated by targeting a US airbase in the early hours of Thursday, state-aligned Tasnim news agency reported. The back-and-forth follows a cease-fire agreed April 8 that has failed to halt low-level hostilities between the two sides.

The Strait of Hormuz handles about 21 percent of global oil trade, making any sustained disruption a direct threat to energy prices worldwide. Brent crude has already surged as the effective closure of the waterway during the three-month conflict sent shipping costs soaring and disrupted commodity flows. If the standoff escalates further, analysts warn crude could spike well above current levels, feeding through to higher gasoline prices and broader inflationary pressure ahead of the US mid-term elections.

Oil Markets Price in Prolonged Disruption

The Strait of Hormuz, a 21-mile-wide chokepoint between Oman and Iran, has been at the center of the US-Iran conflict since the war began on Feb. 28. Sections of the waterway run through both Omani and Iranian territorial waters, giving Tehran leverage over shipping lanes that carry roughly 17 million barrels of crude per day — equivalent to about one-fifth of global consumption.

US efforts to restore commercial shipping, including a naval blockade of Iranian ports, have so far failed to fully reopen the Strait. The resulting supply squeeze has pushed energy prices sharply higher and disrupted trade in refined products, liquefied natural gas, and other commodities that transit the waterway.

The last time the Strait faced a comparable threat was during the 2019 tanker attacks and the 2020 US assassination of Qasem Soleimani, when oil prices spiked as much as 15 percent within days before retreating. The current conflict has already lasted longer and inflicted more sustained damage to shipping routes, suggesting the risk premium may persist.

Negotiations Hang in the Balance

The IRGC's threat comes as US and Iranian negotiators attempt to finalize a more definitive end to the war. Progress has see-sawed since the April 8 cease-fire, with both sides trading new attacks and leveling fresh demands. Iran's Foreign Ministry spokesperson Esmail Baqai said Monday that the two sides "have reached a conclusion on a large portion of the issues under discussion," according to Iranian state media.

But Trump on Wednesday dismissed Iranian claims that the US had agreed to unfreeze billions of dollars in assets or allow joint Omani-Iranian management of the Strait, calling the reported draft a "total fabrication." The administration instead imposed fresh sanctions on Iran's newly created agency seeking to control shipping through the waterway.

William Figueroa, an assistant professor of international relations at the University of Groningen, told TIME that Trump "is trying to prove he is not 'soft' on Iran to placate his critics, but such unpredictability puts the negotiations in jeopardy, especially considering how little trust Iranian negotiators have in the US process."

Beyond crude, the geopolitical risk has rippled across financial markets. Defense sector stocks have gained as investors price in prolonged military engagement. Gold, a traditional safe haven, has drawn bids amid the uncertainty. Currency markets have also felt the strain, with the Iranian rial under pressure and Gulf state currencies facing volatility tied to their exposure to the conflict.

Trump said Wednesday he was willing to "out-wait" Iran and dismissed concerns that the approaching mid-term elections might push him toward a quicker deal. "I don't care about the midterms," he said, while reiterating his threat to "finish the job" if Iran does not agree to terms acceptable to the US.

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