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Oil prices soared on Thursday as the Middle East conflict paralyzed the Strait of Hormuz, triggering severe supply disruption and an unprecedented divergence between benchmarks. 

US WTI crude led the rally, climbing $6.35, or 8.5%, to $81.01 a barrel, its highest since July 2024. Brent gained $4.01, or 4.9%, to $85.41, extending a five-session streak.

The core driver remains the hard closure of the Strait, which has stranded roughly 300 commercial vessels and cut off nearly a fifth of global oil flows. Immediate upstream impacts are mounting: Iraq has shut in almost 1.5 million bpd, Qatar has suspended LNG production as storage fills, and market participants now anticipate imminent supply cuts from Kuwait and the UAE.

WTI’s outperformance reflects signals from the US Treasury on potential futures market interventions, adding volatility even as the White House downplayed domestic fuel prices in favour of prioritising military operations. The geopolitical shock is spilling into downstream markets. 

Vessel attacks, including a confirmed hull breach near Khor al Zubair, have forced refinery run reductions across the Middle East, China, and India. US diesel futures surged 10% above $3.60/gal, underscoring that structural stress in energy markets is likely to persist well beyond any reopening of key transit routes.

Written by: Aiman Haikal