By: Economy Middle East

Oil prices surged on Thursday after Tehran announced the closure of the strategically vital Strait of Hormuz following fresh U.S. strikes on Iran. The move came as President Donald Trump warned that further military action could follow if a peace agreement is not reached.

As of 4:10 GMT, Brent crude futures were up $1.58, or 1.70 percent, at $94.68 per barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.78, or 1.98 percent, to $91.81 a barrel. Earlier in the session, U.S. crude futures had advanced by more than $3.

Hormuz closure triggers oil price rally

Oil prices rose as U.S. President Donald Trump warned on Wednesday that the United States would respond if talks with Iran failed, before American forces launched another wave of overnight strikes against Iranian targets.

In response, Iran’s military announced the closure of the Strait of Hormuz to all maritime traffic, including oil tankers and commercial ships, and warned that any vessel attempting to pass through the waterway would be considered a target. The Strait of Hormuz is a critical artery for global energy markets, carrying a significant portion of the world’s seaborne crude oil exports.

The latest U.S. strikes followed attacks carried out a day earlier in retaliation for the downing of a U.S. Army Apache helicopter near the Strait of Hormuz.

Separately, Trump revealed that U.S. forces had been assisting in the protection of oil shipments through the strait, stating that more than 100 million barrels of crude had already transited the route under American military escort, highlighting the waterway’s strategic importance to global energy supplies.

U.S. crude oil inventories fall by 79 million barrels since February 28

Further supporting oil prices, data from the U.S. Energy Information Administration released on Wednesday showed crude stockpiles fell by 7.2 million barrels to 426.5 million barrels in the week ended June 5, significantly larger than analysts’ forecasts for a decline of about 3 million barrels.

U.S. crude oil inventories, including supplies held in strategic reserves, have declined by 79 million barrels since the Iran conflict erupted on February 28, as the world’s largest oil producer sought to offset supply disruptions caused by the effective closure of the Strait of Hormuz.

Market participants are also watching for the inflationary impact of rising energy prices. U.S. consumer inflation accelerated to 4.2 percent in May, adding to expectations that central banks may need to maintain higher interest rates for an extended period.