Oil rebounds on Iran strikes as markets eye PCE inflation data

Oil prices climbed sharply Thursday after the United States carried out fresh strikes against Iranian military sites and Iran responded by targeting an American airbase. Brent crude futures rose nearly 3 percent to trade around 97 dollars a barrel, while West Texas Intermediate crude gained a similar amount to top 91 dollars. The moves reversed earlier declines that had followed comments from administration officials about progress in talks with Tehran.

The latest American action hit a facility the Pentagon believes posed a threat to U.S. forces and to shipping lanes in the Strait of Hormuz. Officials also reported downing several Iranian drones. Hours later, Iran’s Revolutionary Guards announced they had struck back at a U.S. airbase, though they gave no precise location. The exchange comes after months of tit-for-tat actions that have kept global energy markets on edge.

Traders reacted quickly. S&P 500 futures slipped 0.2 percent in early trading, while Nasdaq futures fell further. The Dow Jones Industrial Average had posted record closes in the prior session on hopes that oil prices would keep easing, but those gains faded as the new round of strikes became clear. Energy costs have already fed into broader inflation readings, and investors now await fresh data that could influence Federal Reserve decisions on interest rates.

Chicago Fed President Austan Goolsbee told CNBC that energy inflation tied to the Iran conflict has lasted longer than markets first assumed. He described the effect on Asian economies as a classic stagflationary shock, noting that oil remains well above pre-conflict levels near 72 dollars for Brent. Goolsbee, who dissented from the Fed’s last rate cut, said he wanted clearer proof that price pressures would not stick around. Higher energy costs, he warned, are spilling into other areas of the economy through what analysts call second-round effects.

The Strait of Hormuz remains a central concern. Roughly one-fifth of global oil shipments pass through the narrow waterway, and any sustained disruption would push prices higher still. Iranian state media has said Tehran would restore commercial traffic to prewar levels within a month of any agreement, yet President Trump has stated he will not accept Iranian control of the strait as part of a deal. Secretary of State Marco Rubio has stressed that the administration prefers a negotiated path, but the latest military moves suggest diplomacy has not kept pace with events on the ground.

For American drivers and businesses, the immediate impact shows up at the pump and in higher transportation costs. The prolonged run-up in crude has already complicated efforts to bring overall inflation back to the Fed’s 2 percent target. With central banks now weighing whether to keep rates higher for longer, households face the prospect of elevated borrowing costs alongside expensive gasoline.

Markets had briefly priced out worst-case supply disruptions after signs of diplomatic movement, but Thursday’s developments reminded traders how quickly the situation can shift. The combination of active strikes, Iranian retaliation, and uncertainty over the timing of any settlement leaves both oil and equities vulnerable to further swings.