Oil price tops $126 a barrel after Trump warns Iran blockade could last ‘months’ | Global economy
The global oil price soared above $126 a barrel, its highest level since 2022, after Donald Trump warned that the US blockade of Iranian ports could last for months and peace talks remained stalled.
After jumping more than 13% in 24 hours, the Brent crude futures price reached its highest level since the start of the war on February 28. Since Russia’s invasion of Ukraine in 2022, Brent has never exceeded $120, with the price peaking at $139.
Oil markets were spooked this week as Trump appeared willing to maintain the U.S. Navy’s blockade of Iranian ports, with Iran responding by keeping the Strait of Hormuz virtually closed to other oil tankers.
Market watchers say traders are starting to look beyond the initial optimism that a diplomatic resolution could restore Gulf oil flows through this vital trade route, and toward “the reality of the supply situation.”
“The breakdown in negotiations between the United States and Iran, as well as President Trump’s rejection of the Iranian proposal to reopen the Strait of Hormuz, is causing the market to lose any hope of a rapid resumption of oil flows,” said Warren Patterson, head of commodities at investment bank ING.
Trump told oil executives this week that the United States would “continue the current blockade for months if necessary,” according to a White House official.
U.S. officials hope the blockade will force Iran to cap its oil wells and halt production once its oil facilities, like Kharg Island, are filled to the brim.
“The blockade is a little more effective than the bombing,” Trump told Axios. “They choke like a stuffed pig.”
The sharp rise in oil prices has increased the risk of a global recession fueled by the rising cost of fuels and industrial raw materials that support most economic activity.
Economist Paul Krugman, a former New York Times columnist, said he believed most analysts had been “far too optimistic” about the effects of a prolonged crisis in Hormuz.
“In my opinion, a full-blown global recession is more likely than not if the Strait remains closed for, say, three more months, which seems entirely possible,” he wrote on his Substack on April 20.
Jim Reid, market strategist at Deutsche Bank, said there were now “growing fears of a prolonged stagflationary shock”, leading to a rise in interest rates – or yields – on government bonds.
“Overnight we saw Japan’s 10-year yield rise to 2.51%, which would be its highest closing level since 1997. The same happened in Europe with the 10-year yield. [German] the Bund yield peaked at 3.11% after 2011, while that of 10-year bonds [UK] government bond yields peaked at 5.07% after 2008,” Reid added.
US inflation soared in March, with prices up 3.3% over the year. Meanwhile, Britain faces a £35 billion economic shock and the risk of a recession in 2026 because of the war, a think tank has said.
Without an end to the biggest oil market supply crisis in history, oil prices could return to the record high of around $147 reached in 2008. Tehran warned two weeks after the strait closed that the world should prepare for a $200 barrel of oil.
