Brent crude hits four-year high as Iran tensions escalate

Oil prices spike on geopolitical risks

June futures for international benchmark Brent crude rose 6.84% to $126.10 a barrel, according to LSEG data, marking the highest level since early 2022. U.S. West Texas Intermediate added 3.14% to $110.24 a barrel on the same day.

The price surge followed an Axios report that U.S. Central Command was set to present Trump with plans for possible military action against Iran, citing two sources with knowledge of the matter. Market concerns were further heightened by reports that Trump had rejected Tehran's proposal to reopen the Strait of Hormuz, signaling that the U.S. naval blockade will remain in place until a broader nuclear agreement is reached.

The Middle East conflict has been constraining supply, with Goldman Sachs estimating that exports through the Hormuz chokepoint have fallen to about 4% of normal levels. Constrained Iranian exports and limited storage capacity are seen as factors that could deepen supply disruptions if the blockade persists.

Market drivers and demand outlook

Bill Perkins, chief investment officer at Skylar Capital Management, said oil markets are currently being driven by a combination of physical disruptions, geopolitics, and investor psychology. The heightened tension was underscored by a Truth Social post from Trump on Wednesday, in which he appeared to threaten Iran, saying the country “better get smart soon!”

Despite the supply concerns and price spikes, Goldman Sachs has highlighted emerging downside risks to demand. The bank estimates that global oil consumption in April may be around 3.6 million barrels per day lower than February levels, indicating potential demand softness even as supply is constrained.

Looking ahead, Perkins said that oil prices could spike toward $140–$150 a barrel if current disruptions persist, underscoring the sensitivity of the market to developments around Iran, the Strait of Hormuz, and U.S. policy.

FAQ

Why did Brent crude hit a four-year high?
Brent crude rose to a four-year high due to escalating tensions between the United States and Iran, including reports of possible U.S. military action and the continuation of a U.S. naval blockade that is disrupting Iranian oil exports and flows through the Strait of Hormuz.

What role does the Strait of Hormuz play in oil markets?
The Strait of Hormuz is a critical oil transit chokepoint. Goldman Sachs estimates that exports through the strait have fallen to about 4% of normal levels, significantly tightening global oil supplies.

How are demand conditions affecting the oil market?
Goldman Sachs has flagged downside risks to demand, estimating that global oil consumption in April may be about 3.6 million barrels per day lower than in February, which could partially offset price pressures from supply disruptions.

How high could oil prices go if disruptions continue?
Bill Perkins of Skylar Capital Management said oil prices could spike toward $140–$150 a barrel if current disruptions and geopolitical tensions persist.