Oil rises $3 a barrel as Iran grounds flights to Gulf states

Brent climbs to $105.38 a barrel after Iranian airlines cancel all flights to the UAE and talks with the US over the Strait of Hormuz show no sign of progress.

Brent crude is up 2.2% to a session high of $105.38 a barrel, with US crude also up $3, as tensions between Iran and its Gulf neighbors deepen. Iranian airlines have cancelled all flights to the UAE, according to Iran's ISNA news agency. Treasury Secretary Bessent said Wednesday that 80% to 90% of Iran's external flights are now grounded.

The move follows a series of setbacks in talks over shipping through the Strait of Hormuz. The US rejected an Iranian proposal to open the strait, Yonhap reported Wednesday. Iran has demanded the US accept a safe route through the strait brokered with Oman, with a four to five day deadline now running. Iran's Foreign Ministry spokesperson said Wednesday that Tehran's conditions for nuclear talks include an end to what it calls a naval blockade and war, along with the unfreezing of its assets.

Officials in Tehran have raised the prospect of wider conflict. Ali Rezaei, secretary of Iran's Security Council, said further US escalation could open a second front at the Bab el-Mandeb strait. A separate Iranian official, Safavi, said the next phase of any conflict could extend into the Indian Ocean. China's foreign minister called for dialogue over the Hormuz dispute as Xi Jinping arrived in the US for talks with President Trump.

The $3 jump is a sharp move, but it comes on top of a crude price that was already elevated before Thursday's session, with Brent trading near $105 a barrel. The flight cancellations and stalled talks add to geopolitical risk, but much of that risk, from the rhetoric of escalation to the breakdown in diplomacy, was already reflected in prices. The rise looks like an incremental reaction to fresh headlines rather than a shift in the underlying calculus for oil markets, leaving the broader outlook largely where it was.