Oil Prices Surge Over 3% as Hormuz Tensions Disrupt Markets

Despite U.S. President Donald Trump announcing an indefinite ceasefire, tensions in the Middle East remain elevated. Global oil prices surged more than 3% in late trading on Wednesday after reports emerged of multiple vessel attacks and seizures in the Strait of Hormuz. The escalation has intensified supply concerns, while rising fuel costs and shortages are forcing airlines to cut capacity ahead of the peak summer travel season.

Oil Prices Resume Upward Momentum

Global crude benchmarks climbed sharply after Iran reportedly opened fire on three vessels in the Strait of Hormuz on Wednesday and escorted two of them toward the Iranian coast. The developments followed the collapse of a second round of talks scheduled for the same day. On Tuesday, President Trump unilaterally declared an indefinite ceasefire agreement with Iran.

According to data from FactSet, Brent crude rose 3.1% to $101.68 per barrel, while West Texas Intermediate (WTI) gained 3.4% to $92.76 per barrel.

The price rally comes as global policymakers explore options to fully reopen the Strait of Hormuz. The U.S. Department of Defense has reportedly informed Congress that clearing mines from the critical waterway could take up to six months, a timeline that could keep gasoline and fuel prices elevated into the U.S. midterm election period.

Raymond James investment strategist Pavel Molchanov said a return to pre-conflict shipping levels through the Strait would require a 'firm and permanent reconciliation' between the United States and Iran. While prices have eased from recent peaks and conditions have not escalated to worst-case missile exchanges, he noted that actual oil supply from the Persian Gulf has already declined by an estimated 10 to 15 million barrels per day since late February. Pre-crisis volumes through the strait were around 20 million barrels per day.

GasBuddy analysis director Patrick De Haan said the average U.S. gasoline price has climbed back above $4 per gallon nationwide. He warned that the initial shock to fuel markets is now entering a more critical phase, with shortages emerging in multiple regions.

The conflict, now in its eighth week, has had the most severe impact on Asian economies heavily reliant on Gulf crude. UBS strategists said Brent crude could remain above $90 per barrel through the end of the year due to sustained supply disruptions. While they expect diplomatic efforts to eventually lead to an agreement, they warned that elevated energy costs could keep inflation under pressure in the United States and complicate interest rate cuts, including for potential Federal Reserve leadership transitions.

Molchanov added that shipping firms remain unwilling to risk assets in the absence of a concrete agreement, but expects flows through the Gulf to recover to pre-war levels within months. 'I don't think it takes eight months, but it's at least a two-month process to restore supply to normal levels,' he said.

Airlines Cut Capacity As Fuel Costs Spike

Rising jet fuel prices are now disrupting global aviation just as summer demand strengthens, forcing airlines to scale back operations to protect margins.

According to OPIS, an energy market data provider under Dow Jones, around 60% of Europe's jet fuel supply is imported from the Middle East, exposing the region to heightened risk. Much of this supply transits through the Strait of Hormuz, a critical global energy chokepoint.

Paul Sankey, president of Sankey Research, said jet fuel inventories at London Heathrow Airport — one of the world's busiest international hubs — are 'extremely low' and declining rapidly. He warned that under current consumption trends, the airport could run out of fuel by July.

Jet fuel markets are particularly vulnerable because kerosene represents a smaller fraction of each barrel of crude compared with gasoline or diesel, limiting refinery flexibility to ramp up output. GasBuddy's Patrick De Haan estimated that the conflict has effectively removed between 650 million and 850 million barrels of global oil supply from the market, shifting jet fuel concerns from potential risk to a 'high probability' of disruption, particularly in import-dependent regions such as Europe.

Several major airlines, including United Airlines and Delta Air Lines, as well as Air Canada and KLM Royal Dutch Airlines, have announced capacity reductions and are entering the summer travel season with leaner schedules. Lufthansa said on Tuesday it will cut 20,000 flights through October.

Alaska Airlines suspended its full-year outlook due to fuel volatility, calling jet fuel 'the largest near-term uncertainty'. It expects April jet fuel costs of $4.75 per gallon, compared with $2.98 per gallon in the first quarter.

United Airlines also lowered its 2026 earnings outlook on Tuesday, citing fuel price pressures as a factor in adjusting its flight plans for the remainder of the year. The airline now expects to scale back planned growth by 5%, with year-end capacity either flat or up by just 2% year-on-year.

United CEO Scott Kirby said during a Wednesday earnings call that airlines in Europe and Asia are under the most immediate pressure, while U.S. carriers face comparatively less strain. He warned that the longer disruptions in the Strait of Hormuz continue, the greater the risk of worsening fuel shortages globally.