U.S. oil prices soar 11% as Trump's Iran war speech stokes fears of further escalation

Oil prices surged Thursday as investors fear a prolonged war in the Middle East that will block tanker traffic through the Strait of Hormuz for weeks.

U.S. West Texas Intermediate crude futures for May rose more than 11%, or $11.42, to close at $111.54 per barrel. International benchmark Brent crude gained nearly 8%, or $7.87, to settle at $109.03.

Comments from U.S. President Donald Trump in a Wednesday evening national address warned of further military aggression against Iran in the next two to three weeks, dampening hopes for an imminent de-escalation in the conflict and driving oil prices higher.

However, prices eased from these heights after reports from Iranian state news agency IRNA said Iran was working with Oman to draft a protocol to "monitor transit" through the critical waterway between the two countries.

Trump in his speech attributed the increase in oil prices to the "Iranian regime launching deranged terror attacks against commercial oil tankers and neighboring countries that have nothing to do with the conflict."

He said that the U.S. will "hit" Iran "extremely hard" over the next two to three weeks, while adding that the war won't last long and discussions with Tehran "are ongoing," leaving a diplomatic resolution on the table.

"We are going to finish the job, and we're going to finish it very fast," he said.

Brent

Meanwhile, a translation of IRNA's report said that tanker traffic in the key shipping channel could resume if "supervised and coordinated" by the two countries, according to Kazem Gharibabadi, Iran's deputy foreign minister of legal and international affairs.

Traffic in the Strait of Hormuz, which used to see a fifth of the world's oil and gas flows, has effectively ground to a halt since the U.S.-Israel war against Iran began on Feb. 28, sending energy prices soaring in one of the world's most devastating energy crises.

"It's becoming increasingly clear that the U.S. position on what you do to get your oil out of and through the Straits of Hormuz is now something which Washington has largely washed its hands off. This is now something for those who take oil through the Strait to sort out for themselves," Giles Alston, political risk analyst at Oxford Analytica, said Thursday on CNBC's "Squawk Box Asia."

George Efstathopoulos, portfolio manager at Fidelity International, told "Squawk Box Asia" on Thursday that markets had braced for a "binary outcome," expecting the president to either signal his plans for a war exit or further escalation and prolonged uncertainty — "clearly we seem to be on the latter path right now."

Trump had said Wednesday in a post on Truth Social that Iran had asked for a ceasefire, briefly raising hopes for more oil tanker movement through the waterway, sending oil prices lower. Efstathopoulos expects the speech to further fuel the risk-off sentiment as investors wait for uncertainty to subside.

Iran's "New Regime President" has asked the U.S. for a ceasefire, a request that will only be considered if the Strait of Hormuz is "open, free, and clear," Trump said. "Until then, we are blasting Iran into oblivion or, as they say, back to the Stone Ages!!!"

The Islamic Republic, however, has denied Trump's claim, saying that the waterway won't be reopened based on the U.S. leader's "absurd displays" and that the key transit route remains "decisively and dominantly under the control of the IRGC Navy."

The two sides have frequently contradicted each other's claims about the existence and status of peace deal talks since the war started. Trump has also sent conflicting signals, reportedly saying negotiations were close to producing a peace deal, but the U.S. was also prepared to escalate fighting by sending thousands of troops to the region.

Brent oil dipped below $100 per barrel for the first time in a week after Trump said Tuesday evening that he expected the U.S. military to wind down operations against Iran in "two or three weeks" and appeared to be declaring victory even without a negotiated deal with Iran. "We'll be leaving very soon," he said.