Oil prices surge as Red Sea tanker attacks and Trump threat escalate tensions with Iran

Oil prices surged Thursday following reports of attacks on tankers in the Red Sea and President Donald Trump threatening a "massive attack" against Iran.

Brent crude futures crossed the $100 per barrel mark for the first time since May 26. The international benchmark gained about 7% to close at $100.69.

U.S. West Texas Intermediate crude advanced about 6% to settle at $92.19. Oil prices have surged more than 30% this month as fighting in the Middle East sharply escalates.

Iran's Houthi allies in Yemen said they targeted two Saudi oil tankers with drones and missiles for violating a maritime blockade that they declared against Riyadh this week.

Trump said the U.S. would hold Iran responsible for any future Houthi attacks on ships in the Red Sea, threatening to inflict "major military punishment" on Tehran and the militants in Yemen.

The president subsequently told Axios in an interview that was "considering a massive attack" against Iran. "Bigger than ever before. I am close to making a decision. We are all set for it," Trump told Axios.

The tanker attacks came hours after Trump warned the U.S. would destroy an Iranian bridge or power plant each time Tehran attacks a ship in the Strait of Hormuz.

Iran responded by warning it would retaliate against U.S.-linked infrastructure and energy assets across the region if Washington carried out those strikes.

"If the Americans target a bridge or a power plant in Iran, Iran will, in turn, strike infrastructure and bridges in the region, including energy facilities where the United States has interests," an unnamed Iranian military source told state-run Tasnim News Agency.

Dangerous escalation

The U.S. war with Iran has entered a more dangerous phase as fighting spreads to the Red Sea and Iran targets critical infrastructure in the Gulf such as water desalination plants, said Helima Croft, global head of commodity strategy at RBC Capital Markets.

Extreme pressure is building in Middle East that could send Brent oil prices above the 2022 high of $128 per barrel after Russia invaded Ukraine, Croft said. Brent could even surpass the 2008 peak of $146 per barrel in a worst-case scenario of full-scale regional war in the Middle East, the analyst said.

The Ukraine-Russia war is also putting pressure on global oil markets, Croft said. Kyiv has attacked more than 150 tankers in the Black Sea and Sea of Azov this month, she said. The tanker attacks have forced the Caspian Pipeline Consortium to stop loading crude at its Black Sea terminal.

About 80% of Kazakhstan's crude is exported through that pipeline, Croft said.

"The duration of closure remains uncertain, but alternate routes for Kazakhstan are limited (and unlikely to fully offset CPC), meaning production (1.7 mb/d in June) could face shut-ins," the analyst said.