Oil surged over 2% to four-week high on Trump sanctions warning and Hormuz deadlock

Global crude benchmarks rallied more than 2% on Thursday to settle at their highest levels in nearly a month, driven by aggressive US threats of secondary economic sanctions against buyers of Iranian crude, persistent transit paralysis in the Strait of Hormuz, and tightening refined product inventories.

International Brent crude futures settled up $2.16, or 2.4%, at $93.78 a barrel, whilst US West Texas Intermediate (WTI) crude gained $2.00, or 2.3%, to finish at $87.83 a barrel—marking the highest settlement for both contracts since 24 July.

Upward momentum was propelled by US President Donald Trump warning of "economic warfare and isolation on an unprecedented scale" against Tehran, threatening severe retaliatory measures against any nation providing an economic lifeline to Iran. Bullish sentiment strengthened as the US Treasury signalled imminent enforcement mechanisms ahead of a scheduled briefing on Monday, escalating supply risk premiums across Asian import corridors—most notably for China, the largest buyer of Iranian crude.

Physical supply tightness was reinforced by ongoing maritime bottlenecks in the Strait of Hormuz, where tanker crossings remained flat day-on-day and substantially below pre-conflict baselines, keeping approximately one-fifth of global petroleum flows constrained. Downstream derivative and fuel balances tightened concurrently, with US distillate stockpiles—including diesel and heating oil—falling for a third consecutive week as regional crude shortages crimped refinery intake.

However, stronger price upside was capped by broader inventory data, as US commercial crude inventories expanded unexpectedly by 4.4 million barrels last week, alongside market skepticism that diplomatic rhetoric alone will compel Tehran to ease its blockade without substantial concessions.

Written by: Aiman Haikal