Oil prices rose sharply on Wednesday after the United States and Iran conducted fresh military strikes against each other, intensifying concerns over supply disruptions in the Strait of Hormuz. Brent crude futures climbed 0.92% to $95.52 per barrel, while U.S. West Texas Intermediate crude rose 0.89% to $91.02 per barrel by 0008 GMT, extending gains from the previous session. Both benchmarks had surged more than $4 on Tuesday, marking Brent’s largest single-day gain since July 24 and WTI’s since July 23.
U.S. launches airstrikes on Iranian targets
The U.S. Central Command confirmed overnight airstrikes against Iranian targets, citing recent attempts by Iran’s Islamic Revolutionary Guard Corps (IRGC) to attack commercial shipping in the Strait of Hormuz and American service members in the region. The strikes followed an incident where a tanker was hit by three unknown projectiles while transiting the strait, according to the U.K. Maritime Trade Operations Centre.
Iran retaliates with missile and drone attacks
Iran’s IRGC claimed responsibility for targeting a U.S. military base in Jordan with ballistic missiles, alleging significant casualties among U.S. forces. Iranian state media also reported a large-scale drone attack on a U.S. base in Bahrain in response to the American strikes. Jordan’s military confirmed its air defenses were activated but did not provide further details on casualties or damage.
Global markets react to escalation
The renewed hostilities triggered a sell-off in global equities, with the Dow Jones falling 0.8%, the S&P 500 down 0.7%, and the Nasdaq Composite dropping 1%. Government bond yields surged to multi-year highs, while the U.S. dollar strengthened amid rising expectations of a Federal Reserve interest rate hike. The price of gold fell 2.7% to $4,329 per ounce as investors sought safer assets.
Strait of Hormuz remains closed to shipping
The Strait of Hormuz, through which roughly one-fifth of the world’s oil supply previously passed, has been effectively closed to commercial shipping since the conflict escalated. The International Energy Agency (IEA) reduced its 2026 global oil supply forecast by 4.3 million barrels per day in August, citing the breakdown of a June 17 ceasefire agreement and renewed closures. Middle East oil loadings have fallen from 20 million barrels per day in early July to approximately 12 million barrels per day as attacks on tankers and infrastructure resumed.
U.S. and Iran exchange warnings
U.S. President Donald Trump stated in a Truth Social post that he was not seeking to force Iran to the bargaining table, adding, “I like our position now much better, with almost total control of the Hormuz Strait, and their economy totally collapsing.” Iranian officials warned that the U.S. strikes would further restrict traffic through the strait, which Iran has vowed to keep closed until sanctions are lifted and the naval blockade is ended.
Economic and political implications
The surge in oil prices has raised concerns about prolonged inflation and economic slowdown. The IEA projected a global oil market deficit of 1.8 million barrels per day in Q3 2026, while analysts warned that elevated fuel costs could complicate economic messaging ahead of the 2026 U.S. midterm elections. Gasoline prices in the U.S. averaged $4.192 per gallon in August, up from $4.064 in July, according to the U.S. Energy Information Administration.
Market analysts assess long-term risks
Edward Rosenberg, head of ETFs at Strategy Shares, noted that “the longer the war with Iran goes on, oil prices will continue to stay elevated and volatile. Sanctions, stalled negotiations, and mixed signals on whether Iran wants the war to end are swinging prices day to day.” Saxo Bank analyst Ole Hansen added that the fresh hostilities raised concerns about “prolonged disruptions to energy flows through the Strait of Hormuz.”
Background: Six months of conflict
The latest escalation follows six months of hostilities between the U.S. and Iran, which began after a joint U.S.-Israel attack on Iranian targets. Tehran responded by closing the Strait of Hormuz, a critical chokepoint for global oil transit. The conflict has seen intermittent periods of relative calm, but the recent exchange of strikes marks a return to direct military confrontation.
U.S. Treasury signals further economic pressure
U.S. Treasury Secretary Scott Bessent indicated that Washington would impose new sanctions on Iran, stating at a G20 meeting that “we are going to continue exerting pressure” and that a turning point in the campaign could come “within weeks or months.” The U.S. has also maintained a counter-blockade of Iranian ports, further restricting oil exports.
Outlook: Uncertainty over de-escalation
Analysts suggest that neither side appears actively seeking a wider war, but the calibrated nature of the strikes leaves the door open for further escalation. The U.S. has framed its actions as defensive, aimed at preventing Iran from mining the strait, while Iran has framed its retaliation as a response to aggression. The situation remains fluid, with both sides warning of further action if provocations continue.