Oil Hits $126 as Trump Vows to Maintain Iran Blockade for Months

Key facts

• Brent crude hit $126 a barrel on Thursday, highest since 2022.
• Oil surged 13% in 24 hours, topping $120 for first time since Russia's 2022 invasion of Ukraine.
• Trump told oil executives the US blockade could last 'months if needed,' per a White House official.
• Iran has kept the Strait of Hormuz all but shut to oil tankers in response.
• Paul Krugman warned a full-on global recession is 'more likely than not' if the strait remains closed for three more months.
• Deutsche Bank strategist Jim Reid cited 'growing fears about an extended stagflationary shock.'
• Oil later fell back to about $114 a barrel on Thursday afternoon.

Lede: Oil Prices Surge as Diplomacy Falters

The global oil price hit $126 a barrel on Thursday, its highest level since 2022, after Donald Trump said the US blockade of Iranian ports could last for months and peace talks remained stalled. After surging more than 13% in 24 hours, the price of Brent crude futures reached its highest price since the war began on 28 February. Not since Russia’s 2022 invasion of Ukraine has Brent topped $120, with the price then peaking at $139. Oil markets have been spooked this week as Trump appeared willing to maintain the US navy’s blockade of Iranian ports, with Iran responding by keeping the Strait of Hormuz all but shut to other oil tankers.

Breakdown of US-Iran Talks Dashes Hopes for Quick Resolution

Market observers believe that traders are beginning to look beyond the early optimism that a diplomatic resolution could restore Gulf oil flows through the vital trade route, and towards 'the reality of the supply situation.' 'The breakdown of talks between the US and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows,' said Warren Patterson, the head of commodities strategy at the investment bank ING. Oil later fell back from its four-year high, to about $114 a barrel on Thursday afternoon.

Trump's Blockade Strategy and Its Rationale

Trump told oil executives this week that the US would 'continue the current blockade for months if needed,' according to a White House official. US officials hope the blockade will force Iran to cap its oil wells and shutter production once its oil facilities, such as Kharg Island, have filled to the brim. 'The blockade is somewhat more effective than the bombing,' Trump told Axios. 'They are choking like a stuffed pig.'

Economists Warn of Global Recession Risk

The sharp rise in oil prices has raised the risk of a global recession fuelled by the rising cost of fuels and industrial feedstocks. The economist Paul Krugman, a former New York Times columnist, said he believed most analysts had been 'far too sanguine' about the effects of a prolonged Hormuz crisis. 'In my view, a full-on global recession is more likely than not if the strait remains closed for, say, another three months, which seems all too possible,' he wrote on his Substack on 20 April.

Stagflation Fears Drive Bond Yields Higher

Jim Reid, a market strategist at Deutsche Bank, said there were now 'growing fears about an extended stagflationary shock,' leading to higher interest rates – or yields – on government bonds. The combination of rising oil prices and stalled diplomatic efforts has left investors bracing for prolonged economic pain. The blockade, if sustained, could disrupt global supply chains and push central banks into a policy dilemma between fighting inflation and supporting growth. As the standoff continues, the prospect of a swift reopening of the Strait of Hormuz appears increasingly remote, with both sides digging in.

Outlook: No End in Sight for the Crisis

With Trump rejecting Iran's overture and vowing to maintain the blockade for months, the immediate path to de-escalation remains blocked. The White House has shown no willingness to compromise, while Iran continues to restrict tanker traffic through the strategic waterway. For oil markets, the key question is how long the standoff can last before triggering a full-blown economic downturn. The $126 peak on Thursday may not be the last record, as traders price in a prolonged disruption. The coming weeks will test whether diplomatic channels can reopen or whether the world must brace for a sustained period of high oil prices and economic instability.

The bottom line

• Brent crude hit $126 a barrel, the highest since 2022, after Trump said the US blockade could last months.
• Iran has all but shut the Strait of Hormuz, a vital oil trade route, in response to the blockade.
• Trump rejected Iran's proposal to reopen the strait, dashing hopes for a quick resolution.
• Economist Paul Krugman warned a global recession is likely if the strait remains closed for three more months.
• Deutsche Bank strategist Jim Reid cited growing fears of an extended stagflationary shock.
• Oil prices later eased to about $114 a barrel, but the crisis remains unresolved.