Oil Jumps Following Fresh Clashes Between U.S. and Iranian Forces

Oil prices rose sharply on Thursday, May 7, 2026, following renewed clashes between U.S. and Iranian forces, further undermining the outlook for a durable ceasefire and a broader agreement to end the 10-week war. Oil prices jumped by as much as 4%, with WTI crude approaching US$98 per barrel and Brent crude closing near US$100.
The renewed hostilities broke out as Washington was awaiting Iran's response to a U.S. proposal that would formally end the war but leave some issues unresolved for now. Iran’s top military command accused the U.S. of violating the ceasefire by targeting an Iranian oil tanker and another vessel entering the strait, while the U.S. military said it acted in self-defence after Iranian forces launched “unprovoked” attacks on guided-missile destroyers transiting the waterway.
US President Donald Trump said three U.S. warships successfully exited the Strait of Hormuz undamaged, but warned that Washington would respond if Iran failed to sign a deal quickly. Nonetheless, U.S. Central Command stated that it does not seek broader escalation, underscoring the delicate balance between deterrence and avoiding a wider regional conflict.
Further, the head of the International Energy Agency (IEA), Fatih Birol, warned that the world is currently losing around 14 Mn barrels of oil per day due to the conflict. Birol reiterated that the IEA remains prepared to take further action after member countries agreed in March to release 400 Mn barrels from emergency reserves.
The continued disruption in Hormuz is likely to keep downside pressure on oil prices limited, while prolonged instability could sustain elevated inflation and tighter financial conditions globally. Consequently, markets are increasingly treating the crisis not as a temporary geopolitical disruption, but as a broader and more prolonged global energy-security shock with implications for inflation, trade flows, and monetary policy expectations.

(Sources: Reuters & Yahoo Finance)