'Will hit Iran's electricity': Primetime Trump gives a crude shock

Oil rallied above $110 a barrel, hitting $114 at one point, after US President Donald Trump vowed an escalation in the war in Iran over the coming weeks, a move that could prolong disruptions to energy flows through the vital Strait of Hormuz.

West Texas Intermediate surged as much as 13.8%, while the global Brent benchmark was near $110. Europe's diesel futures benchmark climbed above $200 a barrel for the first time since 2022.

Trump, in a primetime speech, dashed hopes of a quick end to the war.

Further operations will be carried out "over the next two to three weeks," he said, threatening "to hit each and every one of their electric-generating plants" if Iran doesn't agree to US demands to end the fighting.

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There's little to suggest Iran is close to starting peace talks-let alone conceding defeat-or reopening the Strait of Hormuz, which has blocked off global energy supplies.

The Islamic Republic kept up retaliatory attacks on Israel and Persian Gulf countries on Thursday, with the war approaching the end of its fifth week. Trump said discussions with Iran "are ongoing," without giving any detail.

The gains in crude prices followed Trump's rare address to the nation, where he cast the war as a success. The president said the US would hit Iran hard over the next two to three weeks, and that Hormuz would open "naturally" after the conflict ends, without offering details or a clear timeline. French President Emmanuel Macron said it would be unrealistic to use military means to reopen the strait.

Without a resumption of flows through Hormuz, there's little sign that the pressure on oil markets will abate. WTI prices have roughly doubled since the onset of the year.

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The US leader's unexpectedly hawkish tone helped to push WTI's prompt spread - the difference between its two nearest contracts - to more than $16 a barrel at one point Thursday, the widest premium on record. The move was likely fueled by a rapid unwinding of bearish bets on a quick end to the war and expectations of tighter US supply as overseas buyers rush for American crude, according to traders.

"The market was not positioned for this," said Scott Shelton, an energy specialist at TC ICAP. Investors "expected descalation talk and got the exact opposite," he added.

Prices eased off of intraday highs after Iranian state media reported that Iran is drafting a protocol with Oman to monitor traffic through the strait.

The United Arab Emirates, meanwhile, is appealing to the United Nations to authorize a range of measures, including force, to get oil and gas flowing through the strait again.

While there's been a heavy focus on crude prices, markets for refined fuels have been trading even higher. European diesel's jump on Thursday is the latest surge that underscores the potential inflationary hit to the global economy. Some cargoes have been sailing thousands of miles as buyers in different regions rush to scoop up available supplies.