Crude oil prices surged after US and Iranian forces exchanged fire in the Strait of Hormuz, testing a fragile ceasefire between the two sides. In trading on Thursday (May 8), Brent crude futures climbed as much as 7.5% before easing as Asian markets opened on Friday morning.
At 3:00 GMT, international benchmark Brent crude stood at $101.12 per barrel, slightly down from the day's peak of $103.70. The rally followed a firefight between the US and Iran in the strategic strait, which handles roughly 20% of the world's seaborne oil and natural gas, despite a ceasefire announced on April 7.
The US Central Command (CENTCOM) said it carried out strikes on Iran after three US Navy guided-missile destroyers were attacked by Iranian missiles, drones, and small vessels in the strait. On the Tehran side, Iran's Khatam al-Anbiya Central Command accused the US of violating the ceasefire by attacking an Iranian oil tanker and another vessel near the area. The Iranian military also accused the US of targeting civilian areas, including Qeshm Island.
However, US President Donald Trump downplayed the tensions, stating the ceasefire remained in effect. Meanwhile, Iran's state-run Press TV reported that the situation had “returned to normal.”
Shipping through the Strait of Hormuz has been largely paralyzed since late February due to the threat of Iranian attacks on the supertankers that carry most of the world's fuel. Brent crude is now about 40% higher than before the conflict, reflecting a supply shortfall of an estimated 14.5 million barrels per day.
The escalating tensions dragged Asian stock markets lower in Friday morning trading: Japan's Nikkei 225, South Korea's KOSPI, and Hong Kong's Hang Seng Index all fell more than 1%. Wall Street also came under pressure, with the S&P 500 dropping about 0.4% overnight after reaching a record high earlier.
