Iran Strikes in Strait of Hormuz Send Oil Prices Higher

Oil prices extended their gains on Thursday after an Iranian news agency reported that the Islamic Republic struck 'hostile targets' in the Strait of Hormuz. The move sent US and global benchmark futures contracts up more than 1% in post-settlement trading, following a first gain in three days for West Texas Intermediate.

The surge came as signs mounted that a potential Iran-Oman deal won't lead to a full-fledged resumption of oil shipments through the strait. Iranian media reports suggested Tehran will seek to bar US and Israeli vessels from the waterway and require compensation from hostile countries before they're allowed to use it.

European natural gas futures rocketed as much as 12% on the Fars news agency report of strikes, as traders priced in increased risks to natural gas tankers. Traders remain focused on the status of a potential pact, with Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc., saying 'the longer the delays, the more prices will fade back to the upside.'

Even before the latest developments, the outlook for an agreement had been growing murkier. Iran said a pact on proposed shipping lanes was in the final stages, but has insisted that the US isn't part of the agreement with Oman and hinted a normalization of the strait will depend on the lifting of an American blockade on Iranian ports.