Oil prices swung sharply Thursday, briefly surging to $126 to multi-year highs before retreating as traders navigated escalating geopolitical risks and the monthly expiry of futures contracts, the Financial Times reports. 

Brent crude, the global benchmark, jumped as much as 7% to $126.41 a barrel — the highest level since 2022 and since the Mideast conflict began — before falling roughly $10 to $116.26 at the time of publication.

U.S. benchmark West Texas Intermediate (WTI) also saw large moves. After rising about 7% on Wednesday, WTI reached roughly $109 a barrel during that session before easing back to $106.82.

The initial rally was driven by heightened concerns over supply disruptions in the Middle East.

U.S. President Donald Trump told oil executives that a blockade of the Strait of Hormuz — a critical route for global energy shipments — could last for months, with some expectations extending through June. Additional reports pointing to potential renewed U.S. military action in the Gulf added to market tension.

“The oil market has moved from over-optimism to the reality of the supply disruption we are seeing” in the Gulf, ING analysts wrote in a note.

Amrita Sen, founder of Energy Aspects, said expectations have shifted in response to those risks. “The market is beginning to price in disruptions continuing until the end of June,” Sen said.

At the same time, trading was heavily influenced by the expiry of Brent futures contracts, a monthly event when positions must be converted into physical crude transactions. Expectations had been optimistic heading into the expiry, reflecting the prior month’s buying activity.

Greg Newman of market-maker Onyx described how sentiment evolved among London traders:

“Everyone was expecting it to be a very bullish expiry and everyone to buy up all the physical as they did last month. Unexpectedly this morning, it seems the contract got way ahead of itself. There was a bunch of selling and the price got killed.”

That selling contributed to the sharp reversal from intraday highs.

Beyond oil, the recent rise in energy prices has begun to ripple through global financial markets, particularly government bonds, as inflation concerns resurface.

Germany’s 10-year Bund yield briefly reached 3.13%, its highest level since 2011, before easing to 3.11%. Japan’s 10-year yield climbed to 2.52%, the highest since 1997. Bond yields move inversely to prices, reflecting increased concern about inflation.

“With no sign of any peace talks and fears mounting about an escalation, stagflation concerns are top of mind,” said Jim Reid, Deutsche Bank’s head of macro research.