Oil prices surge as Strait of Hormuz tensions drive Brent above $106

Global oil markets are experiencing significant volatility as Brent crude surged above $106 per barrel. The price spike is driven by renewed anxieties regarding the US-Iran conflict and the security of oil shipments through the Strait of Hormuz. While Brent rose by over 3%, West Texas Intermediate (WTI) remained relatively steady, leading to a widening spread that reflects higher risk premiums for Middle Eastern and seaborne supplies compared to US domestic crude.

In financial markets, investor sentiment has been influenced by a meeting between US President Donald Trump and Chinese President Xi Jinping in Washington. While the two leaders agreed to extend a trade truce for two months, unresolved issues regarding tariffs, technology restrictions, and agricultural purchases remain. The leaders also discussed the stalled Iran conflict and confirmed plans for future summits.

Concurrently, rising inflation fears linked to potential supply disruptions in the Gulf—including the closure of the Strait of Hormuz and Houthi strikes on Saudi infrastructure—have pushed US 10-year Treasury yields to their highest levels since 2007. Bank of England Governor Andrew Bailey indicated that interest rate hikes may be necessary to combat inflation, despite the potential for slowed economic growth.