US President Donald Trump escalated the conflict with Iran, warning of intensified military action and signaling that two to three more weeks of fighting are likely, while ruling out immediate negotiations. Reports also indicate Iran is unwilling to engage diplomatically, and Trump stated the Strait of Hormuz would 'naturally reopen' after the conflict, though Tehran maintains control alongside Oman [1][2]. This escalation triggered aggressive market reactions, with oil prices surging toward $111 per barrel according to FXStreet, and ING analysts reporting Brent above $107/bbl and WTI near $106/bbl on Thursday morning following Trump's address [1][2]. ING analysts Ewa Manthey and Warren Patterson noted that oil rebounded sharply, rising more than 5% after two days of declines, and cautioned that even if shipping through the Strait of Hormuz resumes, a return to pre-war market conditions will be slow due to the time needed for upstream production restarts, logistics normalization, and inventory rebuilding [2].
The heightened supply concerns were reflected in US inventory data, with gasoline and distillate stocks falling by 0.6 million barrels and 2.1 million barrels, respectively, attributed to weak refinery runs despite rising implied demand [2]. Meanwhile, the AUD/USD currency pair fell to near the 0.6890 region, as investors sought the safe-haven US Dollar amid broad liquidation across stocks, bonds, and gold [1]. Technical analysis from FXStreet shows AUD/USD trading at 0.6891, with near-term bias turning mildly bullish after rebounding from 0.6860, supported by the rising 20-period SMA at 0.6889. However, the broader downtrend remains intact, with resistance at 0.6897 and further upside possible toward 0.6920, while a drop below 0.6866 would expose lower support [1].
Market participants are reacting to the uncertainty and potential for prolonged supply disruptions tied to the ongoing closure of the Strait of Hormuz, which has led to elevated oil prices and volatility across asset classes [1][2]. ING analysts emphasize that normalization in oil markets will be gradual, even if the strait reopens, due to the complexities of restarting production and rebuilding inventories [2].
CONCLUSION
Trump's escalation of the Iran conflict has driven oil prices sharply higher and triggered broad market volatility, with the AUD/USD sliding as investors flock to the US Dollar. Analysts warn that even if the Strait of Hormuz reopens, normalization in oil markets will be slow, keeping supply concerns and elevated prices in focus. The event has had a high market impact, with uncertainty likely to persist in the near term.