Brent crude futures climbed above $125 a barrel Thursday, reaching an intraday high of $126.41, the loftiest level since March 2022, before retreating to around $115 late in the session. West Texas Intermediate crude also surged, touching $110.93 before easing to about $104.

The spike stemmed from fears that President Donald Trump would extend the U.S. naval blockade of Iranian ports and the Strait of Hormuz, a chokepoint for roughly 20% of global oil supplies. The blockade, part of the ongoing U.S.-Iran war that erupted in late February, has already slashed tanker transits through the strait to single digits daily, marking the largest supply disruption in history, according to the International Energy Agency. Stalled ceasefire talks and reports of potential U.S. military strikes to break the nuclear negotiation deadlock fueled the rally.

Trump warned oil executives this week that the blockade could persist for months if Iran refuses concessions, heightening market anxiety over prolonged supply shortages. Analysts noted the market's shift from hoping for a quick resolution to bracing for physical scarcity. "Oil prices have ‘nowhere to go but up,’ until the permanent reopening of the strait comes into view," said Vandana Hari of Vanda Insights. Tamas Varga of PVM described the volatility as emblematic of "trading in a Trump world."

By late afternoon EDT, Brent settled near $110.79 for later contracts, reflecting profit-taking after large sell orders in the expiring June contract. The backwardation in futures markets signals expectations of tighter near-term supply.

U.S. gasoline prices hit a four-year high of $4.30 per gallon nationally, with California exceeding $6 amid the Strait fears. Energy stocks rose, with Shell and BP gaining as higher crude prices bolstered producers. However, prolonged disruption risks tipping the global economy into recession, inflating costs for plastics, fertilizers, and consumer goods while straining refiners.

The U.S. maintains the blockade to pressure Iran's regime and curb its nuclear ambitions and regional aggression. Iran has rallied domestically against the measures, vowing resistance, but faces mounting economic strain from halted exports. Markets await any breakthroughs in talks, though escalation remains a key risk factor.