The oil market delivered its verdict on Thursday’s Iranian and Israeli developments with mathematical precision. Brent crude hit $126 per barrel — its highest level since Russia invaded Ukraine in 2022 — and the US national gas average reached $4.30.
The Thursday Move
On Thursday, the global benchmark for oil, Brent crude, traded as high as $126 a barrel.
The average price for a gallon of gas in the US is now $4.30, as sources say US President Donald Trump is laying the groundwork for an extended blockade of Iranian ports.
The move from $113 on Monday to $126 on Thursday — a $13 per barrel increase in four days — is the fastest sustained single-week oil price increase since the war began. It reflects two converging signals: Khamenei’s statement that Iran will not surrender its nuclear programme, and the Israeli defence minister’s warning that Israel may resume military action against Iran.
The Two Triggers
Trigger one — Khamenei’s statement: By explicitly framing Iran’s nuclear and missile capabilities as “national assets” to be protected like territory, Khamenei has publicly aligned himself with the IRGC hardliner position that has been blocking the civilian diplomatic team throughout the war.
Markets interpreted the statement as evidence that the internal Iranian argument — civilian team wants to deal, IRGC says no — has been settled in the IRGC’s favour, at least for now.
Trigger two — Israel’s strike warning: Israeli Defense Minister Israel Katz warned Thursday that Israel may soon resume military action against Iran, signaling that despite what he described as devastating setbacks to Tehran, Israel views the broader campaign as potentially unfinished. Speaking at a ceremony promoting the incoming Israeli Air Force commander, Katz said Iran had been pushed “years backward” in the past year but suggested the campaign was not complete.
An Israeli defence minister publicly warning of resumed strikes at the same moment Iran’s supreme leader publicly defends his nuclear programme is a combination that oil traders read as a significant escalation risk premium — hence $126.
What $126 Means for the Economy
The journey from $71 pre-war to $126 is a 77% increase in 62 days. For comparison, Russia’s 2022 invasion of Ukraine produced a 65% Brent increase over three months. The Iran war has produced a larger price shock in a shorter time — and unlike 2022, there is no apparent near-term ceiling because there is no apparent near-term diplomatic resolution.
At $4.30 national US gas and $126 Brent, the inflationary pressure on the US economy is now substantial enough to affect Federal Reserve policy. Rate cuts that were expected in the first half of 2026 are no longer possible while energy-driven inflation remains at these levels.
