Oil prices climb as US‑Iran tensions reignite, markets watch
Renewed hostilities between the United States and Iran have lifted crude prices, with knock‑on effects on Europe’s inflation and global supply.
Donald Trump warned on Monday that the United States could take "much harder" action if Iran retaliates for recent strikes. The warning came after the US military announced a new wave of attacks on Iranian facilities around the Strait of Hormuz.
US strikes and Iranian retaliation
US Central Command said the latest operations target sites linked to the Islamic Revolutionary Guard Corps following a series of attempted attacks on commercial shipping in the Hormuz corridor. On Sunday, US forces hit rocket launchers on Larak Island, prompting Iran to fire missiles at US positions in Jordan, which were intercepted. The United Arab Emirates also reported shooting down an Iranian drone over its waters.
"We are prepared to take further action if Iran escalates," the president said.
Iranian state media reported that four projectiles struck the southeastern Sistan‑Baluchistan province, near the counties of Chabahar and Konarak, though it did not confirm any damage.
Oil market reaction
Crude futures rose modestly after the news, extending a rally that began earlier this week. Analysts say the price lift reflects renewed worries about supply disruptions through the Hormuz Strait, a vital conduit for about a fifth of global oil shipments.
European inflation data released on Tuesday showed energy prices up more than 14 percent year‑on‑year, a key driver of the eurozone’s 3.3 percent rate, according to Eurostat. Higher oil prices could keep inflation above the European Central Bank’s 2 percent target for longer.
Broader geopolitical fallout
The International Atomic Energy Agency warned in a confidential report that limited access to Iranian nuclear sites remains a proliferation concern, urging urgent action. US Treasury Secretary Scott Bessent said the United States is likely to announce sanctions on an Iranian bank later this week, signalling a broader economic push.
In the Middle East, Israeli Prime Minister Benjamin Netanyahu announced the capture of a senior Hamas security figure in Gaza, while Israel’s foreign minister warned the United Kingdom of retaliation if it imposes new sanctions over settlement activity.
Looking ahead, analysts expect further US strikes if Iran continues to target shipping, and anticipate additional sanctions from Washington and its allies. The market will watch for any escalation that could tighten oil supplies further, potentially keeping prices elevated and adding to inflationary pressures worldwide.
For a deeper look at how the conflict is feeding into European price dynamics, see our piece on German inflation rises with energy costs as US‑Iran war drags on.
