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Oil prices erupted on Thursday, definitively breaching the $100 threshold as Iranian leadership explicitly vowed to maintain its blockade of the Strait of Hormuz amid escalating maritime strikes.

Brent crude futures settled at $100.46 a barrel, surging 9.2%, after touching an intraday peak of $101.60. US WTI crude jumped 9.7% to close at $95.70. Both global benchmarks hit their highest levels since August 2022, brutally erasing the mid-week policy-driven selloff and cementing the severe geopolitical risk premium.

The physical market is currently enduring the largest supply disruption in history. The International Energy Agency calculates that Gulf producers have shut in at least 10 million barrels per day—roughly 10% of global demand. Regional infrastructure is fracturing: Iraqi oil ports completely ceased operations following explosive boat attacks on two fuel tankers, while Oman preemptively evacuated its Mina Al Fahal terminal. Furthermore, 2.35 million barrels per day of Middle Eastern refining capacity is now offline, prompting China to implement an immediate ban on March refined fuel exports to shield its domestic market.

Institutional interventions remain vastly outmatched by this physical destruction. While the IEA approved a historic 400-million-barrel stockpile release, market participants remain highly sceptical, noting the volume equates to a mere 25 days of the current transit disruption. In Washington, the Trump administration is actively considering a temporary waiver of the century-old Jones Act to unblock domestic shipping. However, US Energy Secretary Chris Wright conceded the US Navy is currently unable to provide commercial escorts through the Strait, pushing safe transit expectations to late March.

The forward outlook remains profoundly volatile as the conflict threatens to widen. A severe rocket salvo by Hezbollah, coupled with mounting fears of direct Houthi involvement, raises the spectre of disruptions spilling into the Red Sea, even as Saudi Arabia desperately ramps up crude exports from its Yanbu port. With the market remaining critically unbalanced until operations normalise, traders are bracing for entrenched risk premiums and prolonged logistical paralysis.

Written by: Aiman Haikal