Oil prices jumped more than 7% to hit a four-year high above $126 on Thursday after U.S. President Donald Trump warned that the American blockade of Iranian ports could last months, and a report said he would be briefed on potential fresh military strikes.
While Tehran submitted a fresh proposal this week to reopen the crucial Strait of Hormuz, the U.S. president reportedly did not believe it was negotiating in good faith.
The Wall Street Journal (WSJ) said he had told national security officials to prepare for a long blockade to compel Tehran to give up its nuclear program.
At a meeting of oil executives on Tuesday, he discussed efforts "to alleviate global oil markets and steps we could take to continue the current blockade for months if needed and minimize impact on American consumers," a White House official said on condition of anonymity.
It came as Axios cited two unnamed sources with knowledge as saying that Adm. Brad Cooper, commander of U.S. Central Command (CENTCOM), would brief Trump on potential military action.
The briefing signals the president is seriously considering resuming major combat operations – which were ended more than three weeks ago for talks – to try to break the logjam in negotiations or deliver a final blow before ending the war, Axios reported.
The outlet had earlier reported Trump as saying the blockade was "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 that the naval action would not end until he had secured a deal with Tehran to address its nuclear program, it said.
In a post on his Truth Social platform, Trump wrote: "Iran can't get their act together. They don't know how to sign a nonnuclear deal. They better get smart soon!"
He posted an illustration of himself holding an assault rifle alongside the caption "NO MORE MR. NICE GUY!"
Still, Michael Brown at Pepperstone said: "It must be said that the heated rhetoric here doesn't really tally up with Trump's actions, which largely continue to point away from any sort of re-escalation at this stage.
"That said, while the broader direction of travel is one that continues to point towards a deal of some sort being done, it remains the case that negotiations do appear to be bogged down in a form of stalemate for the time being.
"In light of that, it seems that markets are slowly but surely moving from a 'no news is good news' mantra to a 'no news is bad news' one."
The prospect of the strait – through which a fifth of world oil and gas passes – being closed for months more sent crude surging to the highest level since 2022, after Russia invaded Ukraine.
Brent for June delivery surged 7.1% to $126.41 per barrel in Asian trade, while West Texas Intermediate (WTI) climbed 3.4% to $110.31. Both later pared the gains.
Analysts said traders were beginning to shift to the view that the crisis will not be as short as initially hoped.
Stock markets fell, with Tokyo, Hong Kong, Seoul and Mumbai all down more than 1%, while Sydney, Taipei, Bangkok, Manila and Jakarta were also down. There were gains in Shanghai, Singapore and Wellington.
Paris dropped as data showed France's economy recorded zero growth in the first quarter, while Frankfurt also fell. London was flat.
The dollar, seen as a safe haven during the crisis, rose against its peers.
Equity traders had been relatively upbeat in recent weeks thanks to a revival of the AI trade, which has helped push Seoul's Kospi index to multiple record highs.
The country's Samsung Electronics reported a 750% surge in operating profit to a record high on Thursday, thanks to strong sales of chips crucial for artificial intelligence, while it also forecast healthy demand in the next three months.
That came after Microsoft, Meta and Google-parent Alphabet posted forecast-busting earnings.
Investors were also assessing the outlook for the Federal Reserve's policy actions after four members of its decision-making body dissented on a vote, the most since 1992.
While it voted to hold interest rates owing to fears of a spike in inflation caused by surging energy costs, three "did not support inclusion of an easing bias in the statement at this time."
A fourth voting member, Trump-appointee Stephen Miran, had sought a quarter-point cut.
The meeting was the last with Jerome Powell as Fed boss, with Kevin Warsh – the president's pick – to take over next month.
Trump spent much of his second term blasting Powell for not cutting borrowing costs quickly enough.
