Brent crude climbed above $126 a barrel for the first time since 2022 overnight after US President Donald Trump signalled he would maintain a naval blockade of the Strait of Hormuz.
The benchmark rose 10% to $126.10, while West Texas Intermediate reached $106.88, as hopes faded that a ceasefire in the Middle East would restore Gulf energy flows.
Around 20% of global oil supply typically passes through the strait, which remains largely shut due to security risks.
President Trump has indicated the blockade would continue until Iran agrees to curb its nuclear programme, stating: “The blockade is somewhat more effective than the bombing.
"They are choking like a stuffed pig. And it is going to be worse for them. They can’t have a nuclear weapon.”
He added: “They want to settle. They don’t want me to keep the blockade. I don’t want to [lift the blockade], because I don’t want them to have a nuclear weapon.”
Rising oil prices are fuelling inflation concerns globally, with market analysts warning prices could continue climbing if disruption persists.
Ole Hansen of Saxo Bank told the FT: “Oil will rise several dollars every day as long as there is no end in sight. Markets are tightening and prices need to reflect that.”
Hamad Hussain of Capital Economics added that markets are reacting to increased speculation that the blockade could last for months, rather than days or weeks.