Oil Rally Extends as Trump Deadline Fuels Fears of Major Escalation

Oil prices pushed higher for a third straight session in Asian trading on Tuesday, as markets braced for a potential escalation in the Middle East ahead of a critical U.S. deadline for Iran.

Brent crude climbed 1.5% to $111.37 per barrel, while U.S. West Texas Intermediate (WTI) surged 2.2% to $114.85, reflecting heightened risk premiums across energy markets.

Hormuz Tensions Drive Market Anxiety

At the center of the surge remains the Strait of Hormuz—a vital chokepoint that carries roughly one-fifth of global oil shipments.

Concerns over prolonged disruption in the waterway have continued to dominate sentiment, with tanker traffic already heavily constrained in recent weeks.

Iran Rejects Ceasefire Proposal

Iran has rejected a U.S.-backed proposal that included a 45-day ceasefire and a phased reopening of the strait, opting instead to demand a permanent end to hostilities.

Tehran’s conditions include binding guarantees against future attacks, sanctions relief, and compensation for war-related damages—demands that complicate any near-term agreement.

Trump Issues Final Warning

Donald Trump reiterated that the Tuesday 8 PM ET deadline for reopening the Strait of Hormuz remains firm, warning that failure to comply could trigger U.S. strikes on key Iranian infrastructure, including power plants and bridges.

He also warned that Iran could be “taken out” quickly, signaling an increasingly aggressive stance that has amplified fears of a broader regional conflict.

Conflict Escalation Risks Mount

Ongoing exchanges of attacks between Iran and Israel have underscored the fragile state of negotiations, with little indication of immediate de-escalation.

The continued disruption to shipping routes has tightened global supply expectations, pushing oil prices higher as traders factor in prolonged constraints.

OPEC+ Output Offers Limited Relief

While OPEC+ has announced a modest increase in production, markets have largely dismissed the move as insufficient under current conditions, given the logistical and geopolitical challenges limiting actual supply flows.

Market Outlook

With the deadline looming and diplomatic efforts stalling, oil markets remain highly sensitive to developments in the Gulf.

Any escalation could trigger another sharp leg higher in prices, while even a partial resolution—particularly involving the reopening of the Strait of Hormuz—could ease supply concerns and stabilize markets.