Brent crude exceeds $120 per barrel as Trump keeps Iran blockade in place

Brent crude oil futures jumped 8% to $120 per barrel on Wednesday, hitting their highest level since June 2022, as markets priced in dim prospects for a near-term resolution to the Iran conflict or the reopening of the Strait of Hormuz.

The surge came after US President Donald Trump said Washington would keep its naval blockade on Iran in place until Tehran agrees to a nuclear deal, reinforcing fears of prolonged disruption to energy flows through one of the world's most critical oil transit routes.

Earlier in the day, Trump told the Axios news website that he rejected a proposal from Tehran to reopen the Strait of Hormuz, opting instead to maintain the blockade as leverage over Iran's nuclear program.

"The blockade is somewhat more effective than the bombing. They are choking," Trump told Axios, adding that the pressure "is going to be worse" for Iran.

He said Tehran is seeking an agreement to lift the US blockade on the strategically important waterway, and claimed that Iran's inability to export oil has left its infrastructure "close to exploding."

Separately, Trump said Washington knows where Iran has moved new military equipment during the ongoing ceasefire and warned that it would be destroyed quickly if hostilities resume.

"They may have brought in some light stuff during the ceasefire, and we know exactly where it is, so it will be knocked out within the first 15 minutes," he said.

While Trump described the blockade as an effective pressure tool, Axios reported that US Central Command has developed plans for a "short and powerful" wave of aerial strikes to break the diplomatic stalemate if Iran does not yield. Trump has not yet authorized military action, according to the report.

Oil markets were also rattled by the shock decision of the United Arab Emirates to exit OPEC and OPEC+, adding uncertainty to the producer group's coordination at a time of extreme volatility.

Meanwhile, US inventory data showed sharp declines in crude and fuel stockpiles, while crude exports surged to a record above 6 million barrels per day, underscoring tightening global supply conditions.