Markets rattled by renewed military threats as investors brace for prolonged supply disruptions and fading hopes of swift diplomatic resolution
Oil prices jumped sharply on April 2 after U.S. President Donald Trump signaled an escalation of military action against Iran, dampening hopes for a near-term diplomatic resolution and raising concerns about prolonged disruptions to global energy supplies.
Benchmark Brent crude rose by $8.34, or 8.2 percent, to $109.50 per barrel by 7:39 a.m. ET, while U.S. West Texas Intermediate climbed $9.23, or 9.2 percent, to $109.35. Both contracts reached their highest levels since early March and were on track for their largest daily gains in three weeks, though still below peaks above $119 seen earlier in the conflict.
The rally followed Trump’s prime-time address late on April 1, in which he pledged to intensify strikes against Iran in the coming weeks while offering no clear timeline for reopening the Strait of Hormuz or ending the war.
“We’re going to hit them extremely hard over the next two to three weeks,” he said. “We’re going to bring them back to the Stone Ages, where they belong.”
The absence of any explicit reference to a cease-fire or diplomatic breakthrough unsettled markets that had, until recently, been pricing in a quicker de-escalation.
“Oil rebounded sharply on [April 2] ... after two days of declines, as US President Donald Trump threatened a further escalation of the war with Iran, injecting fresh uncertainty into energy markets,” analysts at ING said in a note.
“Even if shipping through the Strait of Hormuz resumes, a return to pre-war market conditions is likely to be slow, as upstream production restarts, logistics normalization and inventory rebuilding will take time.”
The Strait of Hormuz, a narrow waterway between Iran and Oman, handles roughly one-fifth of global oil supply. It remains effectively restricted by Iran in retaliation for U.S.–Israeli attacks, disrupting tanker traffic and driving up insurance risk premiums.
In his address, Trump urged countries reliant on Persian Gulf energy flows to take a more active role in securing the strait, stating that the United States would assist but not lead such efforts.
French President Emmanuel Macron said on April 2 that reopening the waterway by force would be “unrealistic” due to the threat of Iranian missiles. Speaking during a state visit to South Korea, he said securing the strait could only be achieved “in consultation with Iran” following a cease-fire.
The United Kingdom is hosting a virtual meeting of 35 countries to discuss options for reopening the Strait of Hormuz, though the United States is not expected to participate.
Risk-Off Sentiment Grips Global Markets
The escalation in rhetoric triggered a broad risk-off movement across global financial markets. Stocks declined across Asia and Europe, while U.S. stock futures pointed sharply lower, reversing earlier gains driven by optimism over potential peace talks.
Nasdaq-100 futures fell about 2 percent, with S&P 500 and Dow futures also signaling steep opening losses.
Currency markets mirrored the shift, with investors moving into the U.S. dollar. The dollar index rose 0.68 percent to 100.24, on track for its strongest daily gain since March 18.
The euro fell 0.66 percent to $1.15, while the British pound dropped 0.88 percent to $1.31. The Japanese yen weakened toward the key 160-per-dollar level, and the Australian dollar declined by nearly 1 percent.
“Trump’s comments failed to reassure markets,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia. “Markets are starting to realize that the war will probably escalate further from here before de-escalating.”
U.S. Treasury yields also rose as investors priced in the risk that higher oil prices could fuel inflation and delay interest rate cuts by the Federal Reserve.
Pakistan said on April 2 that it is ready to host U.S.–Iran talks aimed at ending the war, though no timeline has been set and any negotiations depend on both sides’ willingness.
Pakistani officials said regional powers—including Saudi Arabia, Turkey, and Egypt—have supported efforts to create conditions for talks, with foreign ministers agreeing on the need to reduce escalation and open a diplomatic pathway.
Officials in Islamabad added that Pakistan has already conveyed proposals between Washington and Tehran and is working with regional and global partners to build support for a negotiated settlement.
