Oil hits $118 in late April as Trump vows to keep naval blockade on Iran

Oil prices spiked to their highest levels in years at the end of April as President Donald Trump vowed to maintain a US naval blockade of Iran until Tehran agreed to a nuclear deal, dashing hopes for a near-term resolution to the war and reviving fears of a prolonged supply squeeze. Brent crude jumped about 6% on April 29 to close at $118.03 a barrel, while US West Texas Intermediate climbed nearly 7% to settle at $106.88. The following day, Brent briefly touched around $126, its highest level since 2022.

The catalyst was a hardening of the US position. Trump rejected Iran's latest peace proposal, under which Tehran had offered to reopen the Strait of Hormuz and end the war while postponing discussions of its nuclear program. Instead, the president signaled he would keep the blockade in place to pressure Iran toward a broader agreement, telling Axios that the naval blockade was proving more effective than military strikes in squeezing the Iranian economy. With negotiations stalled, the standoff left the critical waterway effectively closed.

The blockade had been imposed earlier in the month following the breakdown of mediated talks, and by late April it was inflicting heavy costs. US officials claimed the operation was costing Iran around $500 million a day in lost revenue, and the Defense Department later estimated that Tehran had forgone billions of dollars in oil income. Iran, for its part, refused to reopen Hormuz until the United States lifted the blockade, creating a mutually reinforcing impasse that throttled crude flows from the region.

For oil markets, the dynamic was acutely bullish. The Strait of Hormuz had historically carried roughly a fifth of the world's seaborne oil and a large share of liquefied natural gas, and with both the blockade and Iran's counter-closure choking the chokepoint, a substantial volume of Middle East crude was kept off the market. Each escalation in rhetoric or military activity added to the risk premium embedded in prices, and the late-April surge reflected traders pricing in a longer and more entrenched conflict.

The move capped a volatile month in which crude had repeatedly swung on the prospects for de-escalation. Earlier in April, prices had oscillated around $100 to $111 as ceasefire frameworks floated by mediators competed with Trump's deadlines and threats of intensified strikes. The late-month rejection of Iran's offer tipped the balance decisively toward the bullish case, pushing benchmarks to fresh multiyear highs and underscoring how far the war had upended global energy markets.

The price action carried significant macroeconomic implications. With Brent near $118 and briefly above $125, the energy shock that had already begun lifting US and global inflation looked set to intensify, complicating the task facing central banks. Higher crude prices flowed quickly to gasoline, diesel and other fuels, feeding the cost pressures that had pushed consumer inflation to multiyear highs and were eroding household purchasing power.

The episode also highlighted the geopolitical complexity of any resolution. Iran's willingness to reopen Hormuz in exchange for lifting the blockade suggested a possible path to de-escalation, but Trump's insistence on tying any deal to Iran's nuclear program raised the bar for an agreement and signaled that the energy disruption could persist. For markets, that meant the supply risk premium was unlikely to fade quickly.

As April drew to a close, the combination of a tightening blockade, a rejected peace overture and oil at multiyear highs left the global economy bracing for further strain. The standoff over Hormuz had become the single most important variable for energy prices and, by extension, for the inflation and growth outlook, ensuring that every development in the conflict would continue to reverberate across crude, currencies and rates in the weeks ahead.