The Exchange of Fire

American forces carried out fresh airstrikes on a military site and additional targets near the Strait of Hormuz, according to a U.S. official cited by Bloomberg. U.S. forces also reportedly intercepted and downed several Iranian drones during the operation.

Iran's Islamic Revolutionary Guard Corps responded the same morning. The IRGC announced it targeted the U.S. airbase that launched the attack at approximately 4:50 a.m. local time, according to Iran's semi-official Tasnim news agency as reported by CNBC. The IRGC did NOT specify the base's location.

What the Markets Said Immediately

Brent crude jumped more than 3% to $97.29 a barrel, according to CNBC. West Texas Intermediate hit $91.71, up 3.42%. For context, Brent had dropped more than 5% the prior Wednesday on peace deal optimism — that gain evaporated overnight.

Treasuries sold off hard. U.S. 10-year yields climbed 5 basis points to 4.53% in Asian trading Thursday, according to Bloomberg's Masaki Kondo. That snapped a six-session rally that had seen yields fall nearly 20 basis points. Two-year yields rose 4 basis points to 4.07%.

Gold — usually the safe-haven winner in a war scare — fell to a two-month low near $4,365 an ounce, down 2%, per Bloomberg's Yihui Xie. A stronger dollar crushed the typical flight-to-safety trade. The Bloomberg Dollar Spot Index climbed 0.3% for a third straight day.

Copper and industrial metals also declined, according to Bloomberg. FTSE futures and the British pound both dropped. The MSCI All Country World Index — the broadest global equities gauge — pulled back from a record high, falling 0.2%.

Citi's Warning: Inflation Is Already Spreading

In a note published late Wednesday, Citi warned that prolonged elevated crude prices are beginning to produce "second round effects" — meaning energy-driven inflation is now bleeding into the broader economy, per CNBC's reporting. Citi said central banks are leaning hawkish in response, weighing tighter monetary policy. That means higher borrowing costs could be coming on top of an already expensive energy bill.

Citi also noted that markets had been pricing out worst-case supply disruption scenarios as peace talk optimism built. That optimism just took a direct hit.

Cargo Cancellations Begin

At least two U.S. liquefied petroleum gas cargoes scheduled to load next month from Gulf Coast export terminals were canceled, according to Bloomberg's Nicholas Lua. Buyers in Asia are in talks to terminate more. Freight costs have surged so high that it's simply not economical to ship. Families across Asia — particularly in countries like Pakistan and the Philippines, already dealing with fuel crises — rely on LPG for cooking.

The Investment Drought Gets Worse

The International Energy Agency published its annual World Energy Investment report Thursday. The finding: global oil project investment is set to fall below $500 billion in 2026, according to Bloomberg's Nayla Razzouk. That would be the third consecutive year of decline. Companies aren't drilling more even as prices spike — because nobody wants to sink capital into infrastructure in a warzone.

Less investment today means tighter supply tomorrow.

China's Demand Is Quietly Collapsing

China's oil imports are projected to drop to 10.9 million barrels per day this year, per London-based consultancy Energy Aspects Ltd., cited by Bloomberg. That would be the weakest since 2022 — pandemic lockdown levels. China averaged 11.6 million barrels per day in 2025.

Beijing was stockpiling crude aggressively last year for energy security. That's over. Demand has structurally weakened, and the war is exposing it. China's demand is one of the biggest variables in global oil pricing. If the world's largest importer is pulling back, that's a ceiling on how high prices can ultimately go — even with Hormuz chaos.

What's Underreported

Most outlets are framing this as a peace-deal-in-jeopardy story. The LPG cargo cancellation data and the IEA investment decline both signal this conflict's damage is becoming structural, not temporary. The economic infrastructure damage that accumulates with every week of stalemate includes drying investment, snapping supply chains, spreading inflation in goods and services beyond energy, and central banks forced toward rate hikes at the worst possible time.

Developments Ahead

Trump said no single nation controls the Strait of Hormuz. He's right in principle. The problem is Iran is currently proving otherwise in practice. Every day without a deal is another day freight costs rise, another canceled cargo, another central bank reaching for the rate-hike lever.

Five percent of the world's oil supply flows through that strait. The shooting is now going both ways. And there is STILL no deal.