Oil prices jump over 2% after Iran–US military escalation

Global oil prices rose more than 2% on May 28 following reports of renewed military escalation between Iran and the United States, with traders reacting to heightened geopolitical tensions in the Gulf region.

Brent crude futures climbed $2.34, or 2.48%, to $96.63 a barrel at 0701 GMT. The more actively traded August contract rose $2.24, or 2.43%, to $94.49, while the July contract neared expiry. U.S. West Texas Intermediate (WTI) crude futures gained $2.26, or 2.55%, to $90.94, Reuters reports. 

The gains followed a sharp decline in the previous session, when both benchmarks fell more than 5% to their lowest level in a month on expectations of a potential U.S.–Iran agreement that could ease tensions and reopen the Strait of Hormuz.

The latest price increase came after the Islamic Revolutionary Guard Corps (IRGC) said it targeted a U.S. airbase in response to what it described as an earlier U.S. strike near Bandar Abbas airport.

“The Islamic Revolutionary Guard Corps said on May 28 it targeted a U.S. airbase after what it described as an early morning U.S. attack near Bandar Abbas airport, Tasnim news agency reported.”

It added a warning of further escalation: “It warned that any repeat of what they called aggression would draw a "more decisive" response.”

A U.S. official told Reuters that American forces had carried out strikes in Iran targeting a site believed to pose a threat to U.S. personnel and commercial shipping in the Strait of Hormuz.

Market analysts said the situation underscored the fragility of the current geopolitical environment.

"The rise in oil prices highlights the fragility of the current 'no peace, no war' situation between the United States and Iran," said Simon-Peter Massabni, head of business development at XS.com.

He added: "While the market holds onto hopes that the conflict is nearing an end, the increasing frequency of skirmishes between the two sides, coupled with Donald Trump's evident frustration, suggests that this conflict may continue. As a result, the Strait of Hormuz is likely to remain closed," he added.

Separately, U.S. crude inventories fell by 2.8 million barrels last week, marking the sixth consecutive weekly decline, according to American Petroleum Institute data. Official figures from the U.S. Energy Information Administration are expected later on May 28.

By Sabina Mammadli