Oil markets whipsaw as Iran-US tensions flare again: Brent swings around $96 amid Strait of Hormuz crisis

European energy markets endured another volatile session on Wednesday 28 May 2026, as renewed military exchanges between the United States and Iran reignited the geopolitical risk premium that has dominated crude pricing since February. The July Brent contract swung sharply, trading around $96 a barrel after the US military downed four Iranian drones and struck a ground base in southern Iran, prompting Tehran to target a US base and vessels in the Strait of Hormuz.

The most significant oil crisis in modern history

Analysts at Ostrum Asset Management have not minced words: the closure of the Strait of Hormuz has created the most significant oil crisis in modern history, with more than 14 million barrels per day knocked out of service and cumulative Gulf production losses exceeding one billion barrels since February 2026. The strait remains the single most important chokepoint in global energy logistics.

The price action has been brutal in both directions. Crude had retreated on Tuesday on hopes of a framework agreement between Washington and Tehran, only to rebound as the strikes shattered that optimism. Energy traders caution that any reported framework could yet be walked back, particularly given the absence of explicit US confirmation.

Equity markets stay cautious

European equities adopted a defensive posture. The volatility feeds directly into the inflation dynamics flagged by the Commission’s Spring Forecast, which now sees energy commodity prices remaining around 20% above pre-war levels well into 2027. For European industry — already grappling with elevated input costs — the prospect of a prolonged Hormuz disruption represents a structural headwind rather than a transitory spike, complicating the European Central Bank’s path ahead of its 11 June Governing Council.