Oil prices surge to monthly high as US prepares extended Iran blockade

Oil prices have soared following reports that the US is preparing for an 'extended' blockade of Iran. Brent crude rose to $119 (£88) a barrel on Wednesday afternoon, the highest price so far this month and a rise of nearly 7% in one day.

The BBC understands that energy executives including Chevron chief executive Mike Wirth met President Donald Trump at the White House on Tuesday to discuss how to limit the fallout from the conflict on American consumers. Oil traders appear to have taken the meeting as a sign the effective closure of the Strait of Hormuz will continue for a prolonged period of time.

The meeting follows separate reports from the Wall Street Journal that US President Donald Trump has instructed aides to prepare to extend the ongoing blockade of Iran's ports, in an effort to squeeze the country's economy. Iran has said it will continue to disrupt traffic travelling through the Strait of Hormuz in response to the US blockade.

The price of oil has seen sharp swings since the start of the war, as the key Strait of Hormuz has been effectively closed for weeks due to the conflict. Iran has severely restricted shipping through the strait — which usually carries about a fifth of the world's supply of oil and liquid natural gas — in response to US and Israeli strikes that began on 28 February.

The US then announced that its forces would intercept or turn back vessels travelling to or from Iran's ports. Analysis by BBC Verify shows that at least four vessels tracked from Iranian ports appear to have crossed the US blockade line.

Despite the fluctuations of recent weeks, the price of oil remains much higher than the pre-conflict price of a barrel. The price of Brent crude dropped to $90 a barrel on 17 April, after a ceasefire between Israel and Lebanon was announced. The US said it would pause attacks on Iran on 8 April. It remains much higher than the pre-conflict price of a barrel. However, the oil benchmark has been rising steadily over the last 12 days, as the US continued its blockade.

Lindsay James, investment strategist at Quilter, said that the impact of the war so far in the UK has been largely limited to higher petrol and diesel prices, but "every day that passes without a resumption of supply sees the risk of physical shortages and steeper price rises on a range of goods increasing".

The Iranian economy is facing a deepening crisis, with rapidly rising prices, falling currency value, and prospects of the oil exports grinding to a halt. According to the Statistical Center of Iran, the annual inflation rate has risen to 53.7%. Around two million Iranians have lost their jobs, directly or indirectly, as a result of the war, the Iranian government had said last week.

On Wednesday, Trump urged Iran to 'get smart soon' and sign a deal, following days of deadlock in efforts to end the conflict. In a post on Truth Social, Trump said the country 'couldn't get its act together.'

The Wall Street Journal cited US officials as saying the president had instructed aides to prepare for an extended blockade of Iran's ports in a bid to force Tehran's hand. Officials said Trump had opted to continue squeezing Iran's economy and oil exports with the blockade as his other options - resuming bombing or walking away from the conflict - carried more risk, according to the report.

Iranian officials said on Tuesday the country could withstand the blockade as it was using alternative trade routes. The World Bank on Tuesday forecast energy prices would surge by 24% in 2026 to their highest level since Russia's full-scale invasion of Ukraine four years ago, if the most acute disruptions caused by the Iran war end in May.

Kathleen Brooks, research director at XTB, said: "Financial markets will now need to price in the prospect of a prolonged blockade."