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Oil prices jumped roughly 2% Thursday after Iran's Revolutionary Guard announced it had targeted a U.S. airbase, escalating tensions following fresh American military strikes inside the country and reigniting fears over the flow of crude through the Strait of Hormuz.
Brent crude futures, the international benchmark, climbed to $96.28 per barrel by mid-morning, while West Texas Intermediate futures rose to $90.75 per barrel.
Iran's Islamic Revolutionary Guard Corps said it struck the U.S. facility at approximately 4:50 a.m. local time Thursday, without specifying the location of the airbase. The announcement followed U.S. strikes on an Iranian military site that Washington said posed a threat to American troops and commercial shipping through the strait.
U.S. forces also reportedly intercepted and downed several Iranian drones during the exchange.
The tit-for-tat strikes came just hours after President Donald Trump rejected reports that Washington was close to a compromise agreement with Tehran over the strait. Secretary of State Marco Rubio said Wednesday that ongoing diplomatic talks had made some progress, adding that Trump would give negotiations "every chance to succeed."
Oil prices had fallen more than 10% since May 18, when Trump announced he had called off an imminent wave of military strikes to allow more time for diplomacy.
In a note published late Wednesday, Citigroup said markets were beginning to price out the worst-case supply disruption scenarios, but cautioned that uncertainty over the timing of any deal was keeping central banks on alert over potential energy-driven inflation pressures.
Iran state television reported Wednesday that Tehran had agreed in a draft memorandum of understanding with Washington to reopen the strait to prewar levels of commercial traffic. The White House dismissed the report as a "complete fabrication."
