Crude oil prices surged more than 5 percent this week as the fragile ceasefire between the United States and Iran appeared close to collapsing. President Trump described the ceasefire as on life support, adding to market fears of a return to full-scale conflict in the Persian Gulf region.
The escalation began when Iran launched drones and missiles at the United Arab Emirates, a US ally. In response, the US said it had sunk Iranian vessels in the Strait of Hormuz, one of the world's most important oil shipping chokepoints. The US military then launched an operation to reopen the strait to commercial traffic, though shipping activity remains significantly reduced.
Defense Secretary Pete Hegseth stated that the ceasefire remains in place, and General Dan Caine, chairman of the Joint Chiefs of Staff, said Iran's attacks fall below the threshold of restarting major combat operations. However, Trump called Iran's response to a US ceasefire proposal totally unacceptable, and analysts say the situation remains volatile.
UK government borrowing costs surged to their highest levels since 1998 as investors reacted to the conflict and rising oil prices. Saudi Aramco reported a 25 percent profit jump as exports shifted to the East-West Pipeline to bypass the Hormuz closure. Qatar sent its first LNG shipment through the strait since the war started, offering a modest sign of normalization.
Economists warn that the prolonged disruption threatens global economic stability. The IMF has warned of potential economic fallout, and central banks may be forced to reconsider interest rate cutting strategies as oil supply tightens and price pressures build across the global economy.