Oil rises more than $1 as escalation in US-Iran strikes unnerve traders

Highlights

• Iran closes Strait of Hormuz, threatens to fire on vessels attempting passage
• US launches additional strikes on Iran, escalating tensions after fragile ceasefire
• US crude inventories fall sharply, EIA reports 7.2 million barrel crude draw

Oil prices jumped on Thursday as Tehran declared the critical energy chokepoint, the Strait of Hormuz, closed after the US launched additional strikes against Iran and as President Donald Trump vowed even more attacks if no peace deal is secured.

Brent futures rose $1.48, or 1.59%, to $94.58 a barrel as of 0243 GMT, while US West Texas Intermediate (WTI) crude climbed $1.71, or 1.90%, to $91.74. US crude futures gained more than $3 earlier in the session.

Iran's top joint military command announced the closure of the Strait of Hormuz on Thursday, including oil tankers and commercial ships, saying any vessel attempting passage will be shot at.

"It once again suggests a deal is still some way off and that energy flows from the Persian Gulf will remain heavily constrained," said ING analysts in a note to clients.

The renewed escalation in fighting prompted oil prices to rally in early morning trading, they said.

On Wednesday, the US military said on X that commercial ships continue to transit in and out of the strait.

It also said no US warships have been struck in the strait, after Iran's state media reported US ships near the waterway were targeted by missiles and drones.

US forces began launching additional strikes against multiple targets in Iran at 5:15 pm EDT (21:15 GMT), the latest in an escalating exchange of attacks that threaten to reignite a full-scale war, which was paused in early April when the two sides agreed to a fragile ceasefire.

Trump told Fox News reporter Trey Yingst on Wednesday evening that the strikes would stop shortly but that he would "bomb the shit out of them" if Iran's leaders did not sign an agreement with the US immediately.

Iran's months-long blockade of the strait, which normally carries a fifth of global oil and gas shipments, has kept oil prices elevated.

Meanwhile, US crude inventories fell by 7.2 million barrels to 426.5 million barrels in the week ended 5 June, the EIA said on Wednesday, compared with analysts' expectations in a Reuters poll for a 4 million-barrel draw.

US crude inventories, including those from strategic reserves, have fallen by 79 million barrels since the Iran war began on 28 February, as the top global producer moved to plug supply gaps after the strait was effectively shut.

Underscoring the squeeze, OPEC output in May slid to its lowest level in over two decades, a Reuters survey showed, as a US naval blockade curbed Iran's exports and Tehran's effective closure of the strategic waterway slashed shipments from other Gulf producers.