Oil jumped Thursday after a senior Iranian adviser raised the idea of taking the war well beyond the Persian Gulf. Brent crude traded at $107.44 a barrel late in the session, up more than 4%. WTI, the US benchmark, gained more than 3% to $95.23.
That leaves Brent about $9 above Tuesday's close of $98.40, when a partial restart of Saudi Arabia's East-West pipeline and hopes for US-Iran talks had pulled prices back toward $100.
A new name on the map
The spark came from Maj. Gen. Yahya Rahim Safavi, a military adviser to Iran's supreme leader. In a video released by the Fars news agency, he noted that the fighting has already spread from Hormuz to the Red Sea. If the US strikes again, he said, the front could reach the Indian Ocean "or perhaps even beyond."
No adviser at that level had named the Indian Ocean before. It is home to Diego Garcia, a US-British base nearly 4,000 kilometers from Iran. Tehran fired at the base back in March but caused no damage, Bloomberg reported.
What an Indian Ocean campaign would look like is anyone's guess. Traders didn't wait to find out.
Missiles over the Red Sea coast
The threat came on the same day as fresh Houthi fire at Saudi Arabia. The Saudi-led coalition said it shot down six ballistic missiles aimed at the Red Sea port of Yanbu and the city of Taif. Coalition spokesman Maj. Gen. Turki al-Malki blamed the Iran-backed Houthis in Yemen. No damage was reported.
Yanbu matters more than usual right now. It is Saudi Arabia's main way around Hormuz: crude pumped west through the East-West pipeline loads there for export. At full capacity the line moves about 7 million barrels a day. It was only partly back in service this week after drone strikes damaged it in eight places.
Brent briefly climbed above $108 as the missile reports came in.
Thin cushion, big swings
Emily Ashford, head of energy research at Standard Chartered, said the market has "very little shock absorbers left." In her view, any credible sign of a new supply outage now has "a disproportionately outsized impact on prices."
September shows it. Brent has ranged from about $98 to nearly $109 this month, according to oilpricelive.com data. Bloomberg puts crude's gain for the year at more than 70%.
Talks still on the table
Prices came off their highs after Reuters reported that US and Iranian negotiators in New York are exploring a phased deal. A senior Iranian official described the first step: Iran reopens Hormuz, and the US ends its economic blockade. Tehran could also regain access to frozen funds.
The sticking point is sequencing. Each side wants the other to move first. Iranian President Masoud Pezeshkian said Iran is ready to talk but won't allow free passage through Hormuz while US sanctions and the blockade remain. President Trump called the talks "very good."
Former US negotiators are split on the blockade. Dennis Ross told Reuters it is "strangling" Iran. Alan Eyre said it is more likely to push Tehran to escalate than to soften.
What to watch
- Any follow-up from Tehran on what an Indian Ocean front would mean
- More Houthi attacks on Yanbu and other Red Sea export sites
- Progress, or a breakdown, in the New York talks on a phased Hormuz deal
- Diesel, where prices are already at record highs and Washington is weighing export limits
For now, one sentence out of Tehran was worth more than $4 on a barrel of Brent.