Oil jumps over 4 percent as Hormuz tensions rattle markets

A jump in oil prices Friday signaled renewed investor anxiety over the Strait of Hormuz, as markets reacted to comments from Washington that dimmed hopes for a swift resolution to the 10-week conflict. The surge reverses a period of optimism, highlighting the market’s extreme sensitivity to geopolitical developments in the world’s most critical energy chokepoint.

“The oil market continues to trade like a geopolitical headline machine, with prices swinging sharply based on every comment, rejection, or warning coming from Washington and Tehran,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Brent crude futures rose $4.04, or 3.99 percent, to $105.33 a barrel, while U.S. West Texas Intermediate crude climbed $4.43, or 4.64 percent, to $99.85 per barrel. The rebound followed heavy losses last week, when both benchmarks fell around 6 percent amid optimism that a U.S.-backed peace proposal could soon reopen the strait to normal shipping traffic.

The disruption is already severe, with the closure of the Strait affecting 18.4 million barrels of oil supply per day—nearly a fifth of global flows—and 20 percent of global liquefied natural gas (LNG) trade. Analysts from ANZ bank warned that “the ongoing risk of renewed disruption in the Strait of Hormuz, depleted inventories and weaker policy coordination is expected to keep a geopolitical risk premium embedded in prices,” forecasting Brent to remain above $90 per barrel through 2026.

Petrochemical Supply Chains Under Pressure

The crisis extends far beyond crude oil, sending shockwaves through the global plastics industry by choking off essential feedstock supplies. Iran is one of the world’s top five producers of ethylene, the building block for widely used plastics, and the conflict has created a dual shock of production uncertainty and shipping constraints. Benchmark polymer prices have spiked by an estimated 15 to 25 percent since the conflict began.

The impact has been swift, with several major producers declaring force majeure. Indonesia's Chandra Asri cited difficulties sourcing naphtha, while Japan's Mitsubishi Chemical and Mitsui Chemicals reduced production. The ethylene-naphtha spread in Asia, a key indicator of profitability, shot above $400 per metric ton in April for the first time, signaling extreme scarcity. Polyethylene prices on the Dallas Commodity Exchange rose approximately 38 percent at their peak and remain about 25 percent above pre-conflict levels.

Logistics costs have further compounded the issue. Additional War Risk Premiums for tankers, while down from their peak, are still up to eight times higher than pre-war levels, adding a significant cost layer that disproportionately affects smaller companies.

Import-Dependent Nations Face Economic Shock

Emerging economies heavily reliant on fuel imports are bearing the brunt of the crisis. A new report from the Energy Transitions Commission (ETC) warned that countries like Bangladesh are among the worst affected. The nation, which imports nearly all of its fossil fuel, has seen fuel shortages and soaring costs ripple through its economy, forcing factories to cut production and hitting consumers with higher transport and household energy expenses.

The International Energy Agency estimates global oil supply fell by eight million barrels per day in March alone, a disruption nearly double the peak recorded during the 1973 Arab oil embargo. "The crisis has exposed the structural weaknesses of fossil fuel-dependent energy systems," the ETC report stated, arguing that the transition to clean energy is now a matter of economic security.

Market attention is now turning to U.S. President Donald Trump’s visit to China, with investors hopeful that Chinese President Xi Jinping can be persuaded to leverage Beijing's influence over Tehran to push for a resolution.

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