• Oil prices rose for a fourth straight day as Donald Trump warned Iran to reach a peace deal or face more attacks.
  • With the Strait of Hormuz still heavily disrupted, traders are increasingly betting oil prices will stay elevated through the rest of 2026.
  • The risk premium is likely to persist until a credible de-escalation pathway emerges, analysts say.

Oil prices extended their rally on Thursday, with Brent crude climbing above $95 a barrel, as geopolitical tensions in the Middle East showed no signs of abating. Donald Trump's latest ultimatum to Iran—demanding a peace deal or facing further military action—has injected fresh uncertainty into a market already grappling with significant supply disruptions at the Strait of Hormuz, a vital chokepoint through which about 20% of global oil flows.

Traders are now positioning for a prolonged period of elevated prices. Open interest in Brent and WTI futures has surged, with options activity heavily skewed toward bullish bets for December 2026 delivery, according to exchange data. "The market is pricing in a sustained risk premium," said a senior trader at a European energy hedge fund, speaking on condition of anonymity. "Until we see a credible path to de-escalation, it's hard to see prices coming down."

The disruption at Hormuz, which began late last month following a series of attacks on tankers, has already reduced throughput by an estimated 30%, according to shipping analytics firm Vortexa. While some vessels have resumed passage under naval escort, insurance premiums have skyrocketed, and many ships remain diverted. The situation is reminiscent of the 2019 attacks on Saudi Aramco facilities, which temporarily knocked out half of the kingdom's production, but analysts say the current crisis is more protracted. "This isn't a one-off event—it's a sustained disruption," said Helima Croft, head of commodity strategy at RBC Capital Markets (RBC). "The market is beginning to realize that."

Efforts to negotiate a ceasefire between Iran and Israel have stalled, with Trump's warning effectively raising the stakes. "Without a deal, the risk of further escalation is high," said a former U.S. diplomat familiar with the negotiations. "The administration is signaling it will not tolerate continued disruption." Iran, for its part, has denied involvement in the attacks but has warned of retaliation if attacked directly.

For oil traders, the situation has become a test of risk management. "We've been through this before, but the the duration and severity are catching many off guard," said the head of crude trading at a major trading house. "We're running stress scenarios for prices staying above $100 for the next six months." That scenario is not far-fetched: Goldman Sachs (GS) raised its three-month price forecast for Brent to $105 on Wednesday, citing the supply risk.

The broader macro impact is also coming into focus. Higher oil prices feed into inflation, complicating central bank policy. The European Central Bank and the Federal Reserve are both monitoring energy costs closely, and a sustained spike could delay rate cuts. "This is the last thing central banks need," said a macro strategist at a major investment bank. "It's a stagflationary shock."

Meanwhile, OPEC+ has so far been reluctant to fill the gap. The group is scheduled to meet next month, but internal divisions remain. Saudi Arabia has signaled it could increase output if needed, but sources familiar with kingdom's thinking say it wants to avoid flooding the market. "They want to see how events unfold before committing," said a delegate from a Gulf state.

As of press time, the U.S. Energy Information Administration was not available for comment. This article will be updated with any response.