Brent crude oil surged past $115 per barrel on April 29, reaching its highest level since June 2022 and marking an eighth consecutive session of gains. West Texas Intermediate (WTI) also climbed above $102 per barrel, extending its rally for a third straight day. The rally was fueled by President Donald Trump's directive to his advisors to prepare for a prolonged naval blockade of Iranian ports, effectively keeping the Strait of Hormuz closed to tanker traffic.
Strait of Hormuz: 'Largest Supply Shock Ever Recorded'
The International Energy Agency (IEA) described the closure of the Strait of Hormuz as 'the largest supply shock ever recorded.' The strait normally handles about 20% of global oil and liquefied natural gas shipments. Since late February, Iran has reduced tanker traffic through the chokepoint to near zero in response to U.S. military pressure. Peace talks collapsed in Pakistan in mid-April without an agreement, and a fragile ceasefire has remained in place since early April. Trump, writing on Truth Social, told Iran to 'wake up fast' and sign a deal, presenting the blockade as a lower-risk alternative to resuming airstrikes.
Iran's economy is under severe strain, with inflation at 53.7%, the rial hitting a record low of roughly 1.8 million per U.S. dollar, and millions of jobs lost due to the conflict. Tehran has vowed to continue disrupting traffic through Hormuz, claiming it can manage through alternative routes. Washington is intensifying pressure with potential sanctions targeting Chinese refiners and countries that pay transit fees through Hormuz. The United Arab Emirates announced it will leave OPEC on May 1 to gain production flexibility, though analysts say the move does little to ease the immediate supply crisis as long as Hormuz remains closed.
U.S. Stocks Slide, Bond Yields Rise Ahead of Fed Decision
Oil's surge compounded existing uncertainty. On April 29, the S&P 500 fell 0.20%, the Dow Jones Industrial Average lost 0.27%, and the Nasdaq dropped 0.41%. Tech giants Microsoft, Meta, Alphabet, and Amazon — with a combined market cap of about $11 trillion — slipped between 1% and 2% ahead of their earnings reports due after the bell. Visa rose over 5% on strong quarterly results, while Booking fell 4% amid its financial results. European markets also declined, with the FTSE 100 down 0.73% and the pan-European Stoxx 600 losing 0.4%.
The yield on the 10-year U.S. Treasury note rose to 4.39%, reflecting inflation concerns tied to rising energy costs. The Federal Reserve is widely expected to hold interest rates steady at its meeting today. Chair Jerome Powell is likely to reiterate that policymakers remain data-dependent, with inflation risks elevated while economic growth remains stable. This is expected to be Powell's last meeting before his term ends in May. The Senate Banking Committee voted 13-11 to advance Kevin Warsh's nomination to be Fed chair, setting the stage for a full Senate vote before May 15.
Outlook: Oil to Stay Elevated Until Hormuz Reopens
The World Bank has forecast that energy prices could rise by 24% overall this year in a prolonged disruption scenario — the steepest projected increase since Russia's 2022 invasion of Ukraine. The average price for a gallon of regular gasoline in the U.S. reached $4.229, the highest since August 2, 2022. Fuel costs are heavily influenced by oil prices, which account for more than half of the pump price. With refineries now switching to more expensive summer-grade gasoline, further pressure at the pump is expected during the peak driving season.
The convergence of big tech earnings, the Fed decision, and the geopolitical oil shock leaves traders with a very thin margin for error. Markets remain volatile. Any progress in U.S.-Iran talks or an agreement to reopen the strait could quickly reverse oil's upward trend, as earlier ceasefire announcements demonstrated. Until then, traders are closely watching energy supply data, Fed signals, and geopolitical news. For cryptocurrency markets, the macro headwind from surging oil and tightening financial conditions could weigh on risk appetite in the near term.