Oil Surges as Trump Signals Intensified Iran Strikes

Oil prices jumped sharply on April 2 after U.S. President Donald Trump signaled an escalation of military action against Iran, dampening hopes for a near-term diplomatic resolution and raising concerns about prolonged disruptions to global energy supplies.

Benchmark Brent crude rose by $8.34, or 8.2 percent, to $109.50 per barrel by 7:39 a.m. ET, while U.S. West Texas Intermediate rose by $9.23, or 9.2 percent, to $109.35. Both contracts touched their highest levels since early March and were on track for their largest daily gains in three weeks, although still below peaks higher than $119 reached earlier in the conflict.

The rally followed Trump’s prime-time address late on April 1, in which he vowed to intensify strikes against Iran over the coming weeks, while offering no clear timeline for reopening the Strait of Hormuz or ending the war.

“We’re going to hit them extremely hard over the next two to three weeks,” he said. “We’re going to bring them back to the Stone Ages, where they belong.”

The absence of any explicit reference to a cease-fire or diplomatic breakthrough unsettled markets that had, until recently, been pricing in a quicker deescalation.

“Oil rebounded sharply on [April 2] … after two days of declines, as US President Donald Trump threatened a further escalation of the war with Iran, injecting fresh uncertainty into energy markets,” ING analysts said in a note.

“Even if shipping through the Strait of Hormuz resumes, a return to pre‑war market conditions is likely to be slow, as upstream production restarts, logistics normalisation and inventory rebuilding will take time.”

The Strait of Hormuz, a narrow waterway between Iran and Oman, is a critical shipping lane that handles roughly one-fifth of global oil supply. It remains effectively restricted by Iran in retaliation for the U.S.–Israeli attacks, with tanker traffic disrupted and insurers raising risk premiums.

In his prime-time address, Trump urged countries dependent on Persian Gulf energy flows to take a more active role in securing the strait, saying that the United States would help but not lead such efforts.

French President Emmanuel Macron said on April 2 that it is “unrealistic” to reopen Hormuz by force due to the threat of Iranian missiles, telling reporters during a state visit in South Korea that securing the strait could only be done “in consultation with Iran” after a cease-fire.

The UK is hosting a virtual meeting of 35 countries to discuss options for reopening the Strait of Hormuz, although the United States is not expected to participate.

Risk-Off Sentiment Grips Global Markets

The escalation of rhetoric triggered a broad risk-off move across financial markets. Stocks fell in Asia and Europe, while U.S. stock futures pointed sharply lower, reversing gains from earlier in the week, driven by optimism over potential peace talks.

Nasdaq-100 futures dropped by about 2 percent, with S&P 500 and Dow futures also indicating steep declines at the open.

Currency markets reflected a similar shift, with investors piling into the U.S. dollar. The dollar index rose by 0.68 percent to 100.24, on track for its strongest daily gain since March 18.

The euro fell by 0.66 percent to $1.15, while sterling declined by 0.88 percent to $1.31. The Japanese yen weakened toward the key 160-per-dollar level, while the Australian dollar dropped by nearly 1 percent.

“Trump’s comments failed to reassure markets,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. “Markets are starting to realize that the war will probably escalate further from here before de-escalating.”

U.S. Treasury yields also rose as investors priced in the risk that higher oil prices could stoke inflation and delay Federal Reserve rate cuts.

Pakistan said on April 2 that it is ready to host U.S.–Iran talks to end the war, although no timeline is set and any negotiations hinge on both sides’ readiness.

Pakistani officials said that regional powers, including Saudi Arabia, Turkey, and Egypt, have backed efforts to create conditions for negotiations, with foreign ministers agreeing on the need to reduce escalation and open a diplomatic track.

Officials in Islamabad have said Pakistan has already passed proposals between Washington and Tehran and is working with regional and global partners to build support for a negotiated settlement.