Global oil prices topped $100 a barrel this week for the first time since July, after U.S. forces destroyed five Iranian tankers carrying crude, raising fears that the Strait of Hormuz could become too dangerous for shipments.
U.S. Central Command said the strikes came in response to two attempts to hit a U.S. Navy warship with ballistic missiles in as many days. Iran has vowed retaliation, and the White House has threatened a stronger response, keeping traders on edge.
A chokepoint under pressure
About one-fifth of the world's oil moves through the Strait of Hormuz, a narrow waterway between Iran and the Arabian Peninsula. Crude has climbed more than 12% over the past month as the standoff there has intensified.
Supplies have kept flowing so far, but the cost of moving them is rising. Shipping insurers are charging higher war-risk premiums, and some freight customers are already paying more to book tankers that sail the route.
What higher oil means for the economy
Consumers are starting to feel the change. U.S. gasoline prices had stayed near multi-month highs even when crude was cheaper, and analysts expect the latest jump to push retail fuel costs up. Airlines, trucking firms and chemical makers all face larger fuel bills.
Higher energy costs complicate the inflation picture for central banks, including the Federal Reserve, which has been weighing how quickly to cut interest rates. Stock markets have drifted near record highs, with investors split between hopes for a diplomatic resolution and fears of a wider war.
What traders watch next
Traders are watching whether Iran targets shipping directly, whether diplomacy resumes, and how much spare capacity OPEC members can add if exports are disrupted. Weekly inventory reports will show whether buyers are stockpiling. For now, the market is pricing in a conflict that shows no sign of easing.