U.S. and Iran traded fire in the Strait of Hormuz — and oil jumped back over $100

The United States and Iran exchanged fire in the Strait of Hormuz on Thursday, pushing their fragile ceasefire to the brink and sending oil prices sharply higher.

U.S. Central Command said it launched strikes on Iran after three U.S. Navy guided-missile destroyers came under attack from Iranian missiles, drones and small boats in the strait, according to Al Jazeera. Iran's Khatam al-Anbiya Central Headquarters earlier accused the United States of violating the ceasefire by attacking an Iranian oil tanker and another vessel in the waterway, and accused Washington of targeting civilian areas, including Qeshm Island. Iran's top joint military command said 10 sailors were wounded in the strike and five more were missing.

U.S. President Donald Trump appeared on Thursday to downplay the clashes, saying the ceasefire remained in effect, while Iran's state-run Press TV said the situation had gone "back to normal," Al Jazeera reported. Trump later called the exchange a "love tap," denying it constituted a breach of the current pause in fighting.

Oil jumps, then eases — but the week is still brutal

Brent crude futures rose as much as 7.5 per cent during a volatile trading session on Thursday, reaching a high of $103.70 a barrel before easing, according to Al Jazeera. On Friday, Brent traded near $99.86, up 1.6 per cent on the day, with U.S. West Texas Intermediate at $91.62 — a second straight day of gains, but still on course for a weekly loss of about 12 per cent, the steepest since the pandemic crash of April 2020.

Brent had fallen to $94.62 on Wednesday as traders bet the U.S. midterm results would push Washington toward a settlement with Tehran. Oil shipments through the strait are running below 60 per cent of capacity, according to ANZ strategist Daniel Hynes, cited by Talk Markets.

Tankers still burning

The firefight came a day after Iran reported a series of tanker fires in the strait. The Revolutionary Guard said on Thursday that two oil tankers and a tugboat had caught fire in separate incidents after using routes Iran considers unauthorized, Reuters reported — one tanker after striking a mine south of the strait, and a supertanker that caught fire while leaving the eastern part of the waterway, with a tugboat that moved in to help also catching fire. Iran's regular army later said three more tankers had struck mines and caught fire, according to the official IRNA news agency.

Separately, the United Kingdom Maritime Trade Operations centre said it had received a report of a tanker struck by two unidentified projectiles about 50 nautical miles north of Qatar on Wednesday night. None of the Iranian claims has been independently confirmed: the Guard did not name the vessels, give their flags, or report casualties.

At least five vessels have reported incidents in the Gulf since Sunday, according to UKMTO, around the same rate as in October, when the agency said 35 vessels were hit — the most of any month of the war, Reuters reported.

Friday: both sides seize and disable tankers

The confrontation escalated again on Friday. Iran's Revolutionary Guard said it had seized an oil tanker, the Ocean Koi, in the Gulf of Oman in a "special operation," claiming the vessel had attempted to disrupt Iranian oil exports, according to a statement carried by the Fars news agency and reported by Al Jazeera.

U.S. Central Command separately said the American military had disabled two Iranian-flagged tankers as they attempted to access Iranian ports in the Gulf of Oman. "US forces in the Middle East remain committed to full enforcement of the blockade of vessels entering or leaving Iran," CENTCOM commander Admiral Bradley Cooper said in a statement.

Talks continue anyway

Despite the shooting, diplomacy has not stopped. Trump said on Wednesday the war could end if "Iran agrees to give what has been agreed to," and Iran's foreign ministry said Tehran was reviewing a U.S. proposal and would convey its view to mediator Pakistan. Reuters reported, via CNBC, that Iran has sent a nuclear proposal to Washington through Qatar.

On Friday, U.S. Secretary of State Marco Rubio said the administration was still expecting a response from Iran on its latest proposal for a more lasting end to the war, and Vice President JD Vance met with Qatar's prime minister in Washington, according to Qatar's foreign ministry. Iran's foreign ministry spokesman said on Friday that Tehran was still reviewing the proposal, according to remarks carried by the semi-official Tasnim news agency.

A senior Iranian official said Tehran could reopen the Strait of Hormuz within two days if the U.S. meets its demands, including lifting oil sanctions and releasing frozen assets, according to Le Private Banker. No agreement has been signed.

Axios reported that Trump rejected an Iranian proposal to reopen the strait in roughly a week in exchange for front-loaded U.S. concessions — lifting the naval blockade, easing oil sanctions and releasing frozen funds before Iran delivered on navigation and wider de-escalation — but that "positive and constructive" discussions continue through mediators.

For Canadians, the stakes are immediate: the strait carries about a fifth of the world's oil and liquefied natural gas, and the standoff has pushed up gasoline and diesel prices at home. Shipping in the strait has been at a near standstill since late February, Al Jazeera reported, and Brent prices are up about 40 per cent compared with before the war.