Oil Prices Surge as U.S.-Iran Conflict Flares in Strait of Hormuz

The escalation follows a Tuesday confrontation where the U.S. struck Iranian coastal sites and revoked Tehran's temporary oil export license. This move came in response to Iranian drone and missile attacks on shipping vessels near the strait, with subsequent retaliation by Tehran targeting U.S.-linked bases in Bahrain and Kuwait. These hostilities effectively terminate the memorandum of understanding signed on June 17, which had briefly stabilized the region.

Energy markets reacted sharply to the breakdown. West Texas Intermediate crude futures climbed 3.3% to $72.75 a barrel, while Brent crude rose 3.3% to $76.58. John Oh, an economist at Commonwealth Bank of Australia, warned that the aggression against a Qatari LNG carrier near the Omani coast casts doubt on the viability of maintaining safe passage through the waterway. Equity markets across the Asia-Pacific region mirrored this volatility; Japan’s Nikkei 225 fell 1.6%, while South Korea’s Kospi plunged 5.5%, forcing the Korea Exchange to implement emergency trading curbs.