Oil Prices Jump As Iran Levies Strait Of Hormuz Toll; S&P 500 Falls As LNG Stocks Rise

U.S. crude oil prices jumped overnight as Iran took steps to formalize a toll on Strait of Hormuz shipping traffic, adding to market nerves about potential U.S. military escalation. With President Donald Trump’s five-day ceasefire now in its fourth day, the S&P 500 slid, while Chevron (CVX) and some other oil and gas stocks posted modest gains. LNG plays including Cheniere Energy (LNG) led the advance among energy sector names.

Trump told Iran via Truth Social on Thursday morning that they’d “better get serious soon” about negotiating a deal with the U.S. “before it is too late.”

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He warned: “because once that happens, there is NO TURNING BACK, and it won’t be pretty!”

Oil Prices

The near-term contract for U.S. crude oil prices traded up 3.3% to $93.32 a barrel on Thursday morning, according to CME Group data. U.S. oil futures climbed above $100 a barrel early Monday before Trump’s Truth Social post about a potential diplomatic breakthrough sent oil tumbling to around $88.

Brent crude futures climbed 5% to $107.30 in Europe Thursday, Intercontinental Exchange pricing shows. Brent oil prices had climbed to $113 on worries about an escalating conflict before sliding to around $100 on Trump’s Truth Social Post.

U.S. futures markets show crude oil prices remaining above $80 a barrel as far out as October, suggesting fallout from the Iran conflict will linger.

Strait Of Hormuz Toll

The secretary-general of the Gulf Cooperation Council, which represents Iran’s Arab neighbors, said Thursday that Iran was charging ships for safe passage through the Strait. Jasem Mohamed al-Budaiwi called Iran’s action “a violation of the United Nations agreement on the law of the sea,” the Associated Press reported.

Iran’s Fars and Tasnim news agencies that are seen as close to Iran’s Revolutionary Guard reported that parliament is moving to “formally codify” Iran’s control of the Strait of Hormuz, while creating a source of revenue through fee collections, AP said.

If Iran “tries to act as the formal gatekeeper of the Strait, the U.S. will likely escalate, potentially through more punitive strikes, troop insertion, or moves against Kharg Island,” wrote BCA Research chief strategist Felix Vezina-Poirier. Kharg houses oil-storage facilities and the port from which the bulk of Iranian oil is exported.

Amid reports of thousands of U.S. troops being sent to the region, “the prospect of a fresh escalation is still top of mind for investors,” Deutsche Bank strategist Jim Reid wrote early Thursday.

Oil Prices: Historic Shock Weeks Away

“The current supply loss remains manageable. But not for long,” BCA Research’s Poirier wrote. “If the disruption persists until mid-April, it could become the largest oil supply loss in history.”

“Iran is keeping that possibility alive to deter any renewed attempt at regime change once the conflict ends,” he said. BCA’s base case is that negotiations will come over the next week or two, though that leaves little room for error.

Deutsche Bank’s Reid highlighted another potentially major hurdle for negotiations. “Iran has demanded for Lebanon to be involved in any ceasefire, implying an end to Israel’s offensive against Hezbollah,” he wrote, citing a Reuters report.

S&P 500, CVX, LNG

The S&P 500 fell 0.4% after paring early losses. The index bounced 0.5% on Wednesday, ending 5.5% below its Jan. 27 record closing high and 1.3% above its March 20 close.

Chevron struggled to remain positive, trading a fraction higher shortly after the open. On Tuesday, the energy giant said it would buy 20,000 barrels of oil per day from Sable Offshore (SOC). Sable’s production off the California coast near Santa Barbara had been stymied by state regulators before the Trump administration ordered the company to restart, citing the Defense Production Act.

How To Read Stock Charts

Diesel prices in California are at a record high $7.12 a gallon, according to AAA. Regular unleaded, though still below the June 2022 record, is selling for $5.84 in California vs. the national average of $3.98.

Cheniere Energy rose 1.2% early Thursday, after losing 3.5% on Wednesday. Shares have climbed 20.6% on the month through Wednesday’s close.

Wells Fargo hiked its LNG stock price target to 335 from 271, citing a structural shift to higher demand for U.S. energy that could outlast the Iran war, according to The Fly investment news site. Wells expects U.S. producers in the Permian Basin to accelerate supply of gas and natural gas liquids.

Golar LNG (GLNG) rose 3.6% amid news it has hired Goldman Sachs to review strategic options, including a potential sale.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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