Oil rebounds on Iran strikes as markets eye PCE inflation data

Oil prices climbed sharply Thursday after the United States carried out fresh strikes on Iranian military sites and Iran responded by targeting an American airbase, reviving fears of supply disruptions through the Strait of Hormuz. Brent crude futures rose nearly 3 percent to $97.16 a barrel, while West Texas Intermediate futures gained a similar amount to reach $91.43. The moves came after a U.S. official confirmed strikes on a site believed to threaten both American troops and commercial shipping lanes, with reports that U.S. forces also intercepted Iranian drones.

The price increase follows a brief dip in crude earlier in the week, when comments from Secretary of State Marco Rubio signaled some progress in diplomatic talks. President Trump emphasized that any agreement would not permit Iran to control the Strait of Hormuz, while Iranian state media indicated Tehran would restore prewar traffic levels through the waterway within a month of a deal. Those signals had eased some immediate supply concerns, but the latest military exchanges quickly reversed the trend.

Equity markets reflected the uncertainty. S&P 500 futures fell 0.2 percent in early trading, with Nasdaq 100 futures dropping about 0.3 percent. Traders appeared to be positioning ahead of a key inflation reading due later in the day, with the oil rebound adding to concerns that energy costs could feed into broader price pressures. Wednesday had seen the Dow Jones Industrial Average reach new intraday and closing records as oil prices retreated on the diplomatic news.

Federal Reserve officials are already weighing how persistent energy costs might affect monetary policy. Chicago Fed President Austan Goolsbee told CNBC that energy inflation tied to the conflict has lasted longer than futures markets initially projected, creating what he described as a stagflationary shock for energy-importing Asian economies. Goolsbee noted that he dissented from the Fed’s final rate cut in 2025 precisely because he wanted clearer evidence that inflation would not reaccelerate. He said recent data have shown the price pressures are proving more durable than early forecasts suggested.

Analysts at Citi observed that markets had begun to price out the most severe supply disruption scenarios as talks between Washington and Tehran advanced. The bank warned, however, that uncertainty around the timing of any agreement is keeping central banks vigilant. Policymakers are assessing whether tighter monetary settings may be needed to counter energy-driven inflation risks, including second-round effects that could spread beyond direct fuel costs.

The situation highlights how geopolitical developments continue to intersect with domestic economic management. Even as both sides signal openness to negotiation, the risk of further escalation remains embedded in energy prices that are still well above pre-conflict levels of roughly $72 for Brent and $67 for WTI. For the Federal Reserve and other central banks, the challenge is determining whether these pressures will fade with diplomatic progress or require a more sustained policy response to prevent inflation expectations from rising.