Oil surpassed $126 a barrel Thursday, its highest price since 2022, as traders worried about a prolonged US-Iran war following President Donald Trump’s decision to extend a blockade of Iranian ports.

Brent crude, the global benchmark, was up more than 12% overnight into Thursday, before paring some gains to trade at $124 as of 2:28 am Thursday. WTI crude, the US benchmark, was up more than 3%, surpassing $110 per barrel.

The latest surge comes as the national average US gas price reached a four-year high of around $4.23, according to AAA data, as a result of the skyrocketing energy prices triggered by the US-Iran war, which has driven prices up more than 27%.

Global crude prices have risen in recent days as face-to-face negotiations between the US and Iran broke down, keeping the Strait of Hormuz – a critical oil and gas shipping channel – effectively shut still.

In a meeting between Trump and his top advisers, the president said he wanted the US naval blockade of Iranian ports to continue, sources familiar with the talks told CNN, and his team has begun laying the groundwork for such an extension, including a longer-term closure of the Strait of Hormuz.

Vandana Hari, founder of energy market analysis firm Vanda Insights, said oil prices have “nowhere to go but up” until the reopening of the strait comes into sight.

“As of now, how and when that might happen is anybody’s guess,” she said, adding that another few weeks of stalemate will unlikely sit well with Trump.

Iran has dismissed the impact of the US naval blockade, with the government saying there is “no worry” about the steady supply and distribution of fuel.

“The enemy will achieve nothing through a naval blockade of Iran,” said Iranian Oil Minister Mohsen Paknejad, who urged the public to cut consumption as the country launches a broad energy-conservation campaign.

A top military advisor to Iran’s supreme leader also warned that “if the blockade continues, Iran will respond,” according to state media. “Such a blockade has essentially achieved nothing and they have not been able to enforce it,” Mohsen Rezaei said, Iran’s state broadcaster IRIB reported.

The possibility of further military action in the Middle East has put traders on alert, said Janiv Shah, vice president of oil markets at Rystad Energy.

“Further escalation and any attacks on energy infrastructure could force benchmarks to gain rapidly,” Shah said. “Elements of demand destruction are already visible globally, which could accelerate with higher prices.”

Daily transits through the Strait of Hormuz have reduced to near zero since the war began in late February, resulting in what the International Energy Agency called the “largest supply disruption in history” for global fuel markets.

Since the US and Iran reached a temporary ceasefire in early April, there has been a slight increase in the number of oil and gas tankers transiting through the strait, though they remained at single digit level, according to data from S&P Global Market Intelligence.

The prospect of prolonging the halt on Middle Eastern energy exports bodes poorly for the global economy, which is already suffering from fuel shortages, rising inflation and dampened consumer activity.

Consumers could see rising prices

As oil prices climb, consumers may face higher prices for everyday products that require energy to manufacture and materials derived from petroleum such as plastic, synthetic rubber or textiles. The current market shortage is already squeezing supplies of items like medical gloves, instant noodles and cosmetics, particularly in Asia, which imports most of its energy and makes most of the world’s goods.

Higher crude prices will also likely force the US Federal Reserve to delay cutting interest rates as inflation climbs, said Alicia Garcia-Herrero, chief economist for Asia Pacific at financial firm Natixis, which revised its expectations for a US rate cut this week from July to September.

Traders expect the Fed, whose two-day meeting ends Thursday, to hold the federal funds rate steady in what’s likely to be Jerome Powell’s final meeting as Fed chair.

“Globally (oil prices above $125 a barrel) forces demand destruction, equity volatility, and central-bank dilemmas between inflation control and growth support,” Garcia-Herrero said.