Inside Thursday's Oil Price Whipsaw: Hormuz Closure, Kharg Island Threat, and Trump's Last-Minute Reversal

CENTCOM disputed the closure within hours, saying commercial ships were still transiting , but the market's reaction was immediate. Brent crude futures jumped $2.30, or 2.47%, to $95.40 a barrel, and WTI surged 4% to trade above $93 . The Strait of Hormuz normally handles roughly one-fifth of global oil and gas shipments , so any formal closure order was always going to trigger a fierce price response.

U.S. strikes, IRGC retaliation, and the Kharg Island threat

The Hormuz announcement did not occur in a vacuum. CENTCOM had already launched fresh strikes on Iranian military installations overnight, and Iran's Revolutionary Guards retaliated by striking what Tehran claimed were U.S. military facilities in Jordan . Bahrain activated warning sirens, and Kuwait temporarily shut its airspace .

President Trump then added fuel to the fire, warning he might seize Kharg Island — the terminal that handles roughly 90% of Iran's crude exports — and take full control of Iran's oil and gas sectors . That threat sent crude futures to their session highs, with some benchmarks showing WTI up more than $3 .

The whipsaw reversal: Trump cancels the strikes

The surge lasted only hours. President Trump posted that he had canceled planned military strikes on Iran because discussions had advanced to the highest levels of Iran's leadership and a broad coalition of regional powers . In that single statement, the market flipped from pricing a full-scale war premium to pricing an imminent ceasefire.

Brent futures collapsed $2.50, or 2.7%, to settle at $90.60 a barrel by 2:38 p.m. EDT . July WTI closed down $2.32, or 2.58%, for the session, fully erasing its earlier advance . The price action was a textbook sentiment-driven reversal: the same algorithmic flow that had chased rising prices all morning reversed within minutes as headline-driven algorithms and discretionary traders hit sell. One analyst described crude prices as "extremely volatile on Thursday, whipsawing higher and lower several times" .

Rystad Energy warns $150 oil is on the table

Despite the intraday crash, the underlying supply warnings from Rystad Energy told a much darker story than the closing prices implied.

Rystad estimated that if U.S.-Iran hostilities resume in earnest, oil prices could move towards $150 per barrel . Jorge Leon, senior vice president and head of geopolitical analysis at Rystad, said it was "too early to say whether the current escalation marks a full resumption of hostilities or a dangerous but still containable episode" .

The consultancy also disclosed that the Middle East war has erased roughly 1 billion barrels of cumulative crude supply from global markets in three months — equivalent to 2.5 times the entire U.S. Strategic Petroleum Reserve . In its May 2026 Oil Market Balances report, Rystad noted the Hormuz crisis has "reshaped the global crude oil balance," forcing refinery run cuts across Asia, the Middle East, and Europe . Even if the strait reopens, Rystad cautioned that most assets would need 4 to 7 weeks to restart production , meaning the physical market would remain tight well beyond any diplomatic breakthrough.

Tehran signals no deal yet — the supply crisis continues

The biggest risk for traders who bought the peace story is that Tehran made clear no agreement had been reached. Iran's top joint military command said the Hormuz closure was a direct response to U.S. strikes and that the strait would remain closed . Iranian state media had reported on June 1 that Tehran had already stopped negotiations with Washington through intermediaries , and weeks earlier, Iran's foreign ministry had said a finalized agreement was "not imminent" .

On Thursday itself, U.S. and Iranian officials were still attempting indirect talks via mediators, but the renewed strikes continued to shred the fragile April ceasefire . The pattern has become familiar: Trump says a deal is close, markets briefly price in resolution, and Tehran signals the opposite, leaving the physical supply disruption intact.

Sentiment whipsaw, physical reality unchanged

Thursday's price action was a dramatic example of how quickly oil markets can flip between war premium and peace hope. The intraday move was driven entirely by shifting expectations of future supply risk, not by any change to the actual flow of crude.

The Strait of Hormuz remains formally closed. Roughly 1 billion barrels of cumulative supply have already been lost. Rystad's worst-case price scenario of $150 per barrel is not priced out. Until tankers physically start moving through the strait again, the supply shock driving global crude balances will persist — no matter what the intraday chart says.