Brent crude jumped above $107 a barrel on Tuesday. The move came after Donald Trump shot down Iran's latest offer for a truce.
The world's biggest oil firm is warning that even when peace shows up, the price hit could linger into 2027.
Oil traders have been pricing in two paths for weeks. A fast truce or a slow one. Trump just pushed the market toward the slow one.
Trump told reporters the truce with Iran is "on life support." He called Iran's offer "garbage." He said the deal has a "1% chance of living."
That isn't the kind of language oil traders want to hear. Brent crude futures for July rose 3.6% to $107.98 a barrel.
West Texas Intermediate, the U.S. price marker, climbed 3.8% to $101.79.
Since the war started on Feb. 28, both Brent and WTI are up more than 40%. Citi told clients in a note Tuesday that prices "can rise further if US-Iran dealmaking remains thorny."
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Amin Nasser runs Saudi Aramco, the largest oil firm in the world. On Monday's earnings call, he said the oil market would need until 2027 to fully settle if the Strait of Hormuz stays shut past mid-June.
The Strait of Hormuz is the choke point between Iran and the Arabian Peninsula. Roughly a fifth of the world's crude moves through it.
With it shut, supply chains for big buyers like China, Japan, and South Korea get scrambled. Refineries that depend on Gulf oil have to scramble for replacements.
Nasser said that even if the Strait reopened today, the market would still take months to rebalance.
Nasser's warning lands as Trump is preparing to meet Xi Jinping in Beijing this week. Henry Wilkinson is the chief intel officer at the firm Dragonfly.
He told CNBC that Trump may press Xi to lean on Iran to take U.S. terms. China is Iran's biggest oil buyer. That gives Beijing real leverage.
Whether Xi uses it is the question every oil trader is now watching.
Higher oil prices feed into gas prices at the pump. That spills into airfares, trucking costs, and most consumer goods. Investors who own oil names have done well this year. Investors who don't have felt the price hike everywhere else.
Investors are tracking two things from here. The first is whether the Strait of Hormuz opens by mid-June, the date Aramco's CEO flagged Monday. The second is whether Trump's Beijing visit leads to something Iran can accept.
Both feed back into the same crude price. And that price has more room to run if either path stalls.
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