Brent surges to $114 in early May as Iran strikes UAE and US launches Hormuz operation

Oil prices surged at the start of May, with Brent crude jumping nearly 6% on May 4 to close at $114.44 a barrel after Iran launched a major attack on the United Arab Emirates and the United States mounted a fresh operation to reopen the Strait of Hormuz. US West Texas Intermediate climbed more than 4% to settle at $106.42, as the escalation reignited fears of a severe disruption to Gulf energy flows and put the fragile ceasefire between Washington and Tehran in jeopardy.

The trigger was a barrage aimed at the UAE. The Gulf state's defense ministry said its air defenses engaged a dozen ballistic missiles, three cruise missiles and four drones launched from Iran, with three people injured in the assault. A fire broke out at the UAE's oil hub at Fujairah, a critical storage and export terminal located just outside the strait, after a drone strike, underscoring the vulnerability of regional energy infrastructure to the widening conflict.

In response, the US military launched an operation it called Project Freedom, aimed at restoring navigation through the Strait of Hormuz and enforcing a naval blockade on Iranian ports. The head of US Central Command said American forces had destroyed six small Iranian boats that were attempting to interfere with shipping in the waterway. US officials reported that two US-flagged merchant vessels had successfully transited the strait, presenting the operation as an early step toward reopening the chokepoint.

Tehran responded with defiance. Iran's military warned that it would attack any US warship approaching the strait, according to state media, sharply raising the stakes of the American naval push. US Central Command denied Iranian media claims that the Revolutionary Guard had struck a US warship, stating that no Navy ships had been hit. The exchange of claims and counterclaims highlighted how close the two sides were to a direct military confrontation at sea.

For oil markets, the episode crystallized the supply risk that had been building since the war erupted in late February. The Strait of Hormuz handles roughly a fifth of the world's oil and liquefied natural gas, and traffic through it had already been sharply curtailed. The combination of a direct attack on a major Gulf producer, damage to export infrastructure and an active US military operation to force the waterway open pushed the geopolitical risk premium to elevated levels, with Brent trading near the upper end of its range for the conflict.

Prices eased only modestly the following session, with Brent slipping toward $113.50, as the market weighed the prospect of further escalation against the possibility that the US operation might eventually restore some flows. The volatility captured the central dynamic of the period: every sign of military action lifted prices on supply fears, while any hint that Hormuz might reopen pulled them back.

The early-May spike marked one of the higher points for crude during the war and stood in sharp contrast to the retreat that would unfold later in the month, when ceasefire optimism drained much of that premium away. Together, the two episodes bracketed a month of extreme swings in which energy prices traded almost entirely on the latest headline out of the Gulf.

For the broader economy, the surge reinforced the inflationary pressures that had pushed consumer prices to multiyear highs and forced several central banks toward tighter policy. With Fujairah ablaze, US warships enforcing a blockade and Iran threatening retaliation, the start of May offered a stark reminder of how much the global energy outlook, and the inflation picture tied to it, hinged on the unresolved conflict.