Oil prices surge then ease after US strikes on Iran and Trump declares ceasefire over

On the ground

US Central Command announced a new wave of strikes against Iranian targets on Tuesday, retaliation for three commercial vessels being attacked in the Strait of Hormuz. Speaking at the NATO summit in Ankara the following day, President Donald Trump said the truce was finished and threatened further action.

I think it's over. I don't want to deal with them anymore. They are scum.

Trump added that the US would "hit them hard tonight." NATO Secretary General Mark Rutte defended the American response.

When there is a ceasefire and Iran essentially violates the ceasefire, we see what happened yesterday with the attacks on ships – I think it is absolutely critical that the US react vigorously.

Oil market shock

Brent futures closed up 5.43% at $78.19 per barrel on Wednesday, having touched an intraday high of $79.26. WTI rose 4.37% to $73.52. The moves pulled prices well above the pre-war level of around $71 seen on 3 July. By Thursday morning European trade, Brent had eased 0.3% to $77.73 and WTI slipped 0.2% to $73.40.

Traders focused on the Strait of Hormuz, through which roughly one-fifth of global seaborne oil passes. Reuters reported that several tankers had already altered course or suspended transit. Investment firm Saxo warned the market was being forced to reprice disruption risk.

Even limited disruptions can have a disproportionate effect on prompt prices, shipping costs and market sentiment.

Matthew Ryan, head of market strategy at Ebury, said the key question was whether the halt in talks was temporary or a definitive return to widespread hostilities.

That could drastically change the outlook for the energy market.

Equities sell off then stabilise

US stocks fell on Wednesday as the oil spike raised inflation fears. The Dow Jones Industrial Average dropped 576.76 points (1.09%) to 52,348.39. The S&P 500 slipped 0.28% to 7,482.71, though the Nasdaq bucked the trend with a 0.2% gain to 25,870.65. Energy stocks rallied – Marathon Petroleum rose 5%, ConocoPhillips 2%, Chevron 1% – while consumer names and travel firms fell, with Booking Holdings losing 4%.

By Thursday morning, appetite for risk had partially returned. S&P 500 futures added 0.3% and Europe's Stoxx 600 climbed 0.5%, encouraged by the pause in oil's climb.

Timeline of escalation

Local fuel pressure

In Greece, the wholesale price rise is expected to lift pump prices by around two cents per litre, pushing the nationwide average for unleaded to about €2.00 per litre. On Wednesday, average prices stood at €1.97 nationally, €1.93 in Athens and Thessaloniki, and €2.15 on the islands.