Oil extends gains with Brent at $120 as fears of an extended U.S.-Iran conflict rise

Oil extended gains Thursday on signs of a prolonged U.S. blockade of Iranian exports and stalled nuclear negotiations, stoking fears that supplies will remain tight for longer.

The gains come as Axios reported that Trump had rejected Tehran’s proposal to reopen the Strait of Hormuz, signaling the naval blockade will remain in place until a broader nuclear agreement is reached. 

Brent crude rose about 1.96% to around $120 a barrel, while U.S. West Texas Intermediate added 0.2% to $107.09.

Prices had risen on Wednesday as The Wall Street Journal reported, citing U.S. officials, that U.S. President Donald Trump had instructed aides to prepare for an extended blockade of Iran.

Oil prices have surged to their highest levels since mid-2022, data provided by Goldman Sachs suggested.

The bank estimates that exports through the Hormuz chokepoint have fallen to just 4% of normal levels, while stalled U.S.-Iran negotiations and a continued U.S. blockade tightening supplies. 

Constrained Iranian exports and limited storage capacity could deepen supply disruptions if the blockade persists, the bank’s analysts said, adding that boost to output from the UAE following its OPEC exit is likely to materialize more gradually over the medium term rather than offsetting near-term tightness.

However, the bank flagged emerging downside risks to demand, noting global oil consumption in April may be about 3.6 million barrels per day lower than February levels, with weakness concentrated in jet fuel and petrochemical feedstocks.