Oil prices surged over 3% on Friday, with Brent crude trading at $101.13 and West Texas Intermediate crude reaching $95.59, reversing sharp losses recorded earlier this week when prices had fallen on hopes of a diplomatic breakthrough between the US and Iran. The latest rise followed fresh attack reports from the West Asia front, with US President Donald Trump announcing that three US Navy warships were transiting the Strait of Hormuz and exchanged fire with Iranian attackers. According to The Hindu BusinessLine, US Central Command reported that US forces intercepted unprovoked Iranian attacks and responded with self-defence strikes as US Navy guided-missile destroyers transited the Strait of Hormuz to the Gulf of Oman on May 7. Iran accused Washington of violating the ceasefire, saying US forces targeted two ships in the Strait of Hormuz and struck civilian areas. Iran's military claimed the US targeted an Iranian oil tanker, another vessel, and civilian areas both in the strait and on the mainland, as reported by The Economic Times. In a post on Truth Social, Trump said US forces had destroyed the Iranian targets involved in the confrontation, while also warning Iran of further military action if it failed to reach a nuclear agreement.
The Iran war is rapidly depleting global oil inventories at an unprecedented pace, with Morgan Stanley estimating global oil stockpiles dropped by about 4.8 million barrels a day between March 1 and April 25 — far exceeding the previous peak for a quarterly drawdown. According to The Hindu BusinessLine, crude accounts for almost 60% of the decline, and refined fuels the rest. Crucially, the system requires a minimum level of oil, which means that the 'operational minimum' is reached long before the inventories actually hit zero, said Natasha Kaneva, JPMorgan Chase's head of global commodities research. JPMorgan warns that inventories in the Organisation for Economic Co-operation and Development could reach 'operational stress levels' early next month, if the strait doesn't reopen, and then 'operational minimum' floors by September. The US has already drawn down domestic inventories, with US crude stocks including the Strategic Petroleum Reserve dropping for the last four straight weeks, while distillate stockpiles were at their lowest point since 2005 and gasoline stockpiles hovering near their lowest seasonal levels since 2014.
The most immediate stress points are emerging in Asia, with oil inventories in the Asia-Pacific region outside of China falling by about 70 million barrels since the conflict began, according to Kayrros co-founder Antoine Halff. Kayrros said stockpiles in Japan and India are at least 10-year seasonal lows, down 50% and 10% respectively since the war began. Pakistan's petroleum minister said it has roughly 20 days of commercial reserves of refined products, while India's oil ministry acknowledged that refineries have burnt through a sizable amount without elaborating. Diesel — the lifeblood of the global economy — is facing a crunch, with countries hit hardest being those with limited domestic crude production and refining capacity, said Xavier Tang from Vortexa Ltd. In Europe, jet fuel inventories in the Amsterdam-Rotterdam-Antwerp hub have plunged a third since the war started to a six-year low, with summer demand potentially causing stocks to dry up in five months. If the Strait of Hormuz doesn't reopen by early June, some Asian countries will face a macroeconomic shock because of gasoil shortages, predicted Frederic Lasserre from energy trader Gunvor Group.
The rebound came after three straight sessions of losses driven by reports earlier this week that Washington and Tehran were nearing an agreement to halt hostilities and fully reopen the Strait of Hormuz. However, the proposed deal was expected to leave broader disputes over Iran's nuclear programme unresolved. Brent crude, which had traded above $115 a barrel earlier in the week, dropped 7.8% to $101.27 before Friday's gains. Despite Friday's gains, both crude benchmarks are still on track to end the week around 6% lower, according to The Economic Times. The rally in oil prices sent both stocks and bonds lower on concerns that an escalation of hostilities over the Strait of Hormuz will keep energy costs elevated, fueling global inflation risks. With oil prices not far from a four-year peak, the decline in Treasuries sent 30-year yields above 5%. The 10-year Treasury yield rose to 4.45% from 4.39% late Friday, up from just 3.97% before the war began, making mortgages and other loans more expensive for U.S. households and businesses.
Gold prices climbed 0.4% to $4,728.70 per ounce on Thursday, with the precious metal benefiting from safe-haven demand amid escalating US-Iran tensions. According to The Economic Times, gold prices were trading higher due to safe-haven asset bets, though rates still remained under pressure on rising US dollar demand. Experts said that the US dollar rates were holding firm due to the escalating tensions in the Strait of Hormuz, which fuelled the demand for the safe-haven greenback. Data from Bloomberg's US dollar spot index (DYX) showed that the greenback was witnessing higher demand, trading 0.18% higher at 98.244 as of 10:32 pm (ET) on Thursday evening, compared to the previous currency market close. The interconnected nature of global financial markets means that geopolitical tensions continue to create ripple effects across asset classes, with traders closely monitoring further statements from Tehran, Washington, and US Central Command for signs of escalation or de-escalation.
Despite broader market weakness, several companies delivered strong quarterly results, with the strength extending beyond Big Tech superstars. As reported by The Associated Press, Tyson Foods joined the list Monday of those topping analysts' expectations for both profit and revenue during the latest quarter. The company sold less beef than it did a year ago but achieved 11.5% higher prices, with total beef revenue edging up. It also sold more chicken and pork than a year earlier, at slightly higher prices, with its stock rising 4.1%. Norwegian Cruise Line Holdings likewise delivered a better profit for the latest quarter than analysts expected, though the war has raised pressure on fuel prices and pushed some customers to reconsider travel plans, particularly to Europe. The cruise operator's stock fell 8.6% despite the positive earnings, with the company citing "execution missteps" that have bookings below desired levels.
