Oil prices climbed Thursday, with Brent crude rising about 2% to around $120 a barrel, as signs of a prolonged U.S. blockade of Iranian exports and stalled nuclear talks pointed to tighter global supply.
U.S. West Texas Intermediate crude edged above $107, extending gains of 6% to 7% in the previous session. The Wall Street Journal reported Wednesday that the blockade and deadlocked negotiations are reinforcing expectations of a sustained supply crunch.
Prices have climbed to their highest levels since mid-2022 as tensions in the Middle East disrupt flows through the Strait of Hormuz.
The rally followed reports that President Donald Trump rejected Iran's proposal to reopen the critical shipping route, signaling the blockade will remain until a nuclear agreement is reached.
Negotiations between Washington and Tehran remain at a standstill, with analysts increasingly pricing in a prolonged supply shock.
Trump also escalated rhetoric in a post on Truth Social Wednesday, warning Iran to "get smart soon" and suggesting the U.S. would take a harder stance, a message that underscored rising geopolitical tensions and added to market jitters.
Further support for prices came from U.S. data showing large inventory draws and record crude exports of 6.4 million barrels per day, highlighting immediate supply tightness.
Analysts say the U.S. is acting as a "supplier of last resort" as global markets absorb reduced Iranian exports, which Goldman Sachs estimates have fallen to just 4% of normal levels through Hormuz.
Market participants warn that limited spare capacity and constrained storage could deepen disruptions if the blockade persists, while gains in longer-dated oil contracts point to expectations of sustained supply strain.
However, some downside risks are emerging, with global demand showing signs of softening. Consumption in April is estimated to be significantly lower than earlier in the year, particularly in jet fuel and petrochemical sectors, potentially tempering further price increases.
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