Category: Commodity Markets

WTI dropped 5.61% to $80.03 a barrel by Monday’s early European session — the first sub-$80 print since March — after President Trump declared on Truth Social that “The Deal with the Islamic Republic of Iran is now complete,” adding “Ships of the World, start your engines.

Let the oil flow!” Some analysts cited by CNBC have cautioned that the market may be underestimating the operational challenges associated with restoring supply flows.

The deal, confirmed by Pakistan Prime Minister Shehbaz Sharif — who served as mediator — calls for the Strait of Hormuz to reopen without a toll system and for the U.S. to end its naval blockade of Iran.

The official signing ceremony is scheduled for Friday in Switzerland. Brent for August delivery fell 5.16% to $82.82, with the Stoxx 600 Energy Sector off 2.3% at the European open and the FTSE 100 Energy Sector down 4%, with BP shedding 3.8% and Shell 3.7%, according to CNBC’s Spencer Kimball and Lee Ying Shan.

Equities read the opposite way. Dow futures added 440 points (0.9%), S&P 500 futures climbed 1.14%, and Nasdaq 100 futures popped 1.79%. In Asia, South Korea’s Kospi led with a 5.56% surge; Japan’s Nikkei 225 added 4.90%. The risk-on bid was real. The crude repricing may have overshot.

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The Strait Reopens, But Supply Normalisation May Take Time 

The market is treating a geopolitical announcement as an operational reality. It isn’t — not yet.

Daniel Hynes, senior commodity strategist at ANZ, told CNBC’s Access Middle East that the energy shock is “far from over,” and that shipping traffic through Hormuz returning to pre-conflict levels is not something he foresees for the foreseeable future.

“The difficult phase is ahead of us. It’s going to be a very, very challenging recovery process.” — Daniel Hynes, ANZ, CNBC

The reasons are structural, not political. Hynes flagged three: heavy drawdowns on global oil inventories during the four months Hormuz was effectively closed; mines still present in the Strait requiring clearance before safe transit; and the maintenance and repair backlog on ships stranded in the region during the conflict. “I suspect it could take weeks, if not a month or two,” he said.

Westpac, in a note cited by CNBC’s Hugh Leask and Justina Lee, put the inventory problem bluntly: global oil stocks, depleted by the prolonged Hormuz closure, “will need time to be rebuilt and are likely to fall further before new supplies begin to arrive from the Gulf.” The bank added that “the devil remains in the detail and hence uncertainty is likely to remain elevated.”

Hynes’ assessment differs from the market reaction seen on Monday. He stated that, in his view, oil prices around $80 may not be sufficient to rebalance market conditions over the next three to six months. The market, he said, “is oversimplifying things.”

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800 Million Barrels and What It Means for the Rest of 2026

Bart Melek, global head of commodity strategy at TD Securities, made the inventory math explicit on CNBC’s Squawk Box Asia: even if flows through Hormuz normalised immediately — a heroic assumption given the mine-clearance timeline — 800 million barrels of inventories into November would still likely be lost.

“The market is quite relieved that we’re having a deal, but I think we’re not out of the woods yet.” — Bart Melek, TD Securities, CNBC

Melek added that higher oil prices remain “very much in the cards and all the inflationary implications that brings along,” with one partial offset: if China opts to stop drawing on its strategic reserves at some point, it could prevent the most severe price spikes. That’s a conditional — not a given.

The inflationary read matters beyond crude itself. Willem Sels, Global Chief Investment Officer at HSBC Private Bank and Premier Wealth, told Squawk Box Asia that the economic effects of the Middle East conflict have already begun hitting “the most vulnerable parts of the economy,” with “challenging economic data, especially from countries in South Asia” adding another source of potential volatility.

For equity markets, the cross-asset logic cuts two ways. Energy producers — BP, Shell, the broader FTSE 100 energy weighting — took the day’s hit on the peace-deal relief trade. If crude prices were to recover as some analysts anticipate, energy-sector companies could experience different market dynamics than those observed immediately following the announcement. Airlines and logistics names, who faced fuel-cost pressure through the Hormuz closure, get the near-term relief on lower spot crude, but the structural drag on inventories means the relief could be shorter-lived than the equity moves suggest.

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What The Frontline CEO Said Last Week

One piece of sourced colour from the days before the deal: Lars Barstad, CEO of oil tanker company Frontline, told CNBC the week prior that he was “actually very optimistic the minute the tide turns and the U.S. and Iran have found some sort of agreement, at least not to attack shipping, that those transits are going to resume pretty quickly.” Barstad’s optimism was conditional — “not to attack shipping” is a lower bar than full mine clearance and fleet repair. His framing was about the pace of resumption, not about inventory rebuilding or the risk premium that persists in the market.

The distinction matters. Fast transit resumption and fast supply normalisation are different timelines, and the market appears to have priced in the former while discounting the latter.

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The Genuine Bear Case for a V-Shaped Recovery in Crude

The scenario where $80 holds and the market doesn’t revisit the $90s rests on a few variables. First, if OPEC+ chooses to fill the supply gap aggressively rather than defend price. Second, if China’s demand picture deteriorates materially — Sels’ point about South Asian economic stress extends to broader EM demand softness. Third, if the peace agreement’s technical implementation is faster than the most optimistic mine-clearance estimates allow.

According to analysts cited in this article, these scenarios are currently viewed as less likely than the supply-constrained outlook. Hynes argues that a geopolitical risk premium may continue to influence crude prices even after the immediate supply disruption subsides. 

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What’s Next

• Strait of Hormuz formal peace signing ceremony — scheduled for Friday (as stated by President Trump on Truth Social, per CNBC). Mine-clearance technical talks to begin this week following facilitation meetings.
• EIA Weekly Petroleum Status Report — EIA — inventory data will be the first hard read on how deeply Hormuz-related drawdowns have cut into U.S. crude stocks.
• Federal Reserve communications — Fed calendar — with oil’s inflation implications in play, market participants may monitor any Federal Reserve commentary regarding the potential impact of energy prices on inflation expectations and monetary policy. 

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Risk Disclaimer: Trading CFDs involves substantial risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You may lose some or all of your invested capital. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not a reliable indicator of future results. This article is provided for general informational and educational purposes only and does not constitute financial, investment, legal, tax, or trading advice, nor a recommendation, solicitation, or offer to buy or sell any financial instrument.

Market participants appeared to focus on reports of increased shipping activity through the Strait of Hormuz rather than broader geopolitical developments. WTI crude fell 3.7% to $87.89 per barrel by 10:42 a.m. ET Tuesday, and Brent lost 3.19% to $91.24, after U.S. Energy Secretary Chris Wright told CNBC’s Brian Sullivan at the Atlantic Council Global Energy Forum that ship traffic through the Strait of Hormuz is “rising very meaningfully.” That one phrase — “rising very meaningfully” — did more in twenty minutes than weeks of White House optimism. Spencer Kimball, CNBC.

The move matters because it suggests the market had been heavily bid on disruption risk, not on any fundamental supply tightness. A single observational data point from a cabinet secretary — no signed deal, no formal IAEA inspection, no agreed timeline — was enough to strip nearly four percent out of the front month. The market reaction may reflect the unwinding of positions linked to supply disruption concerns rather than a reassessment of underlying supply fundamentals.

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Trump’s “Two or Three Days” Have Already Come and Gone

President Trump said Monday that a deal with Tehran to reopen Hormuz could materialise in “two or three days.” He has said versions of this repeatedly since the crisis escalated. No agreement has materialised. The fragile ceasefire put in place in April nearly collapsed this week after Iran launched missiles at Israel in retaliation for Israeli strikes in Lebanon; Israel responded with strikes on Iran. Trump pressured Prime Minister Benjamin Netanyahu to stand down from further attacks. As of Tuesday, both sides have declared a cessation of fire — but the situation remains live.

The violence briefly spiked oil prices Monday. The reversal Tuesday, driven by Wright’s comments, shows how quickly positioning can flip when new information cuts through the geopolitical noise. While market sentiment improved following the comments, uncertainty regarding regional developments remains.

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The Biggest Supply Disruption in History — Still Running

The scale of what’s happening to Hormuz supply deserves to be stated plainly. Oil prices have surged roughly 30% since the U.S. and Israel struck Iran on February 28, according to CNBC. Tehran responded by attacking tankers and mining the sea lane. Commercial traffic through the strait collapsed. Industry executives and analysts have described it as the biggest oil supply disruption in history.

Some analysts have suggested that existing global inventory levels may have helped mitigate the impact on prices. Stockpiles have been absorbing the shortfall. But those inventories are drawing down — and summer demand peaks are approaching. The math on that inventory depletion, layered over seasonal demand, is what the longer-dated oil curve is pricing, even as the front end sells off on today’s news.

Here’s the read that’s doing quiet work in the market: JPMorgan analysts wrote in a June 4 note that some crude and petroleum products are still transiting Hormuz on tankers that have switched off their AIS transponders. The bank estimated roughly 2 million barrels per day may be getting out via vessels running dark.

“Despite the ongoing naval blockade and the steep decline in commercial traffic, surprising volumes of crude and petroleum products still appear to be transiting the Strait,” JPMorgan analysts wrote on June 4.

That 2 million bpd “shadow flow” estimate is the context for why today’s Wright comment landed so hard — it may have reinforced expectations that shipping activity is improving ,Whether it’s real or durable is a separate question.

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The Sell-Off Has Cross-Asset Consequences

A 3.7% drop in WTI ripples outward. Airlines and trucking operators, whose fuel costs track crude closely, may see margin relief if the move holds — though the degree of that pass-through depends on hedging positions that vary by carrier. Refiners face a more complicated picture: crack spreads could compress if crude input costs fall faster than product prices adjust.

Energy-heavy equity indices — and the FTSE 100 carries a substantial weighting toward majors like Shell and BP — tend to lag on days like this. Lower crude prices may negatively affect revenues for producers with significant exposure to oil prices. Whether the broader equity tape treats this as a demand-positive supply shock (lower input costs) or a risk-reduction signal depends on whether the Hormuz story reads as a resolution or a temporary de-escalation.

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The Counter-Case Deserves a Hearing

The sustainability of the recent decline in oil prices remains uncertain.. The honest counter-case: Wright’s comments describe traffic that is “rising,” but rising from what base? Commercial traffic “plunged” following Iran’s tanker attacks, per CNBC. A partial recovery in ship movements doesn’t restore the volumes of global oil supply that transit Hormuz at full commercial capacity. No deal has been signed. Trump’s naval blockade on Iranian ports and vessels remains in place. The April ceasefire between Iran and Israel nearly unravelled this week — it has not been formalised or reinforced.

Atlantic Council CEO Fred Kempe, speaking on CNBC’s Power Lunch, framed it bluntly: no Strait of Hormuz deal means oil prices will rise. The inventory drawdown story that industry executives have been flagging doesn’t go away because a cabinet secretary sees more ships on the water.

The risk to the downside on this read is a confirmed, durable diplomatic agreement that formally reopens Hormuz to commercial traffic — that would represent a genuine structural repricing of the supply premium baked into the 30% rally since late February. Future price movements may be influenced by developments in regional tensions, shipping activity, inventory trends, and broader market conditions. 

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What’s Next

The next concrete catalysts for this story are diplomatic, not scheduled in the way a CPI print or an FOMC meeting is. Watch for:

• Any formal announcement from the U.S. State Department or Iranian foreign ministry on a Hormuz framework agreement
• Weekly U.S. petroleum inventory data from the EIA, which will show whether the domestic stockpile buffer is still holding
• Further developments in the Iran-Israel ceasefire, particularly any response from Netanyahu following Trump’s pressure to stand down

The Atlantic Council Global Energy Forum, where Wright made his remarks, continues Tuesday — further comments from energy officials there could move the tape.

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Risk Disclaimer: Trading CFDs involves substantial risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You may lose some or all of your invested capital. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not a reliable indicator of future results. This article is provided for general informational and educational purposes only and does not constitute financial, investment, legal, tax, or trading advice, nor a recommendation, solicitation, or offer to buy or sell any financial instrument.

The oil market‘s split verdict on Tuesday says more than either price alone: WTI futures fell roughly 5% to $91.87 a barrel while Brent climbed 2.14% to $98.2, a divergence that reflects two competing reads on the same event — one appearing more focused on diplomatic progress, the other more sensitive to shipping and transit risks .

The U.S. military conducted what CENTCOM described as “self-defense strikes” in southern Iran early Tuesday, targeting missile launch sites and Iranian boats attempting to emplace mines in the Strait of Hormuz, even as the Trump administration insisted the peace talks were “proceeding nicely.”

That tension — live fire coexisting with active diplomacy — is the defining feature of this market moment. CENTCOM spokesman Tim Hawkins told CNBC’s Lim Hui Jie that the military was “using restraint during the ongoing ceasefire,” a framing that attempts to square the circle between combat and negotiation. Some market participants appear uncertain about whether those dynamics can coexist for an extended period. 

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The Brent-WTI Split Is the Story

WTI’s 5% slide looks like a deal trade — domestic supply expectations recalibrating on the assumption that a nuclear agreement eventually reopens Iranian barrels to the market. Brent’s 2.14% gain looks like a transit-risk trade — Brent being the benchmark more directly exposed to Persian Gulf routing and Hormuz throughput. Secretary of State Marco Rubio, speaking from India according to Reuters reporting cited by CNBC, said the Strait of Hormuz “has to be open, one way or the other” — language that carries an implicit threat but also an implicit acknowledgment that it isn’t fully open right now.

The spread between the two benchmarks matters for names with physical exposure to Gulf loading. Refiners running Brent-priced crude see their input costs rising even as WTI-based U.S. crack spreads compress. 

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What a “95% Done” Deal Actually Means for Supply

Fox News, citing senior U.S. officials on Monday, reported the Iran deal was “95% there.” Rubio added the deal could take “a few days.” Trump’s own Truth Social post framed Iran’s enriched uranium stockpile as heading for U.S. custody or destruction. That appeared to be the broader diplomatic objective being discussed publicly 

The ceasefire itself was reached on April 8. Since then, the Strait of Hormuz has seen mine-laying attempts, U.S. marines seized the Iranian cargo ship Touska later in April, and both sides traded fire in May — each claiming the other shot first. The pattern is a ceasefire that keeps generating tactical incidents. “95% done” in that context carries a different weight than it would in a stable negotiation.

Chen Lanhee, partner at advisory firm Brunswick, put it plainly on CNBC’s Squawk Box Asia: “It doesn’t matter what Iran does or doesn’t have, it doesn’t matter what the contours of the deal are. They just want the war over to bring petrol or gas prices down.” That’s a political read on public sentiment, but it maps directly to the WTI trade — the market may be pricing public pressure on the White House to close rather than the deal’s underlying merits.

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Risk Sentiment and the SPX Angle

For equity markets, the near-term risk profile remains uneven  in a way that doesn’t obviously favour bulls or bears. A deal that reopens Hormuz and puts Iranian barrels back into the market is deflationary for energy input costs — broadly supportive for consumer discretionary and transport names that have been squeezed by elevated fuel costs. That scenario may partly explain the recent WTI price movement.

But the path to that outcome runs through a live conflict. Mine-laying in a critical shipping lane, seizures of cargo vessels, and active Strait of Hormuz exchanges are not the backdrop against which risk-on typically builds momentum. Equities — specifically the SPX — may stay range-bound until the diplomatic timeline clarifies. Rubio’s “few days” framing sets a short fuse for the market either way.

Gold (GC) is sometimes viewed by market participants as a traditional safe-haven asset during periods of geopolitical uncertainty , though the source data doesn’t give current spot levels. The logic is straightforward: an incomplete deal combined with active military exchanges may continue supporting demand for traditional safe-haven assets. 

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The Counter to the Bull Case

The bear case for the oil-deal trade is the ceasefire’s track record. This is not the first military exchange since April 8 — it’s part of a pattern. If the administration’s “95% done” framing slips, as it has informally on previous diplomatic deadlines, the tactical incidents are not a speed bump; they become the story itself.

Mine-laying attempts, even unsuccessful ones, are often monitored closely by shipping insurers and energy markets alike . War-risk premiums on Hormuz-transiting tankers have been building since April, and those effects may persist even after diplomatic developments. 

Trump’s own language offers the clearest downside signal: his Truth Social warning to take things “Back to the Battlefront and shooting, but bigger and stronger than ever before” is not the language of a negotiation in its final hours. Market pricing currently appears more focused on the reported diplomatic progress. That may reflect positioning dynamics as much as underlying fundamentals, , and it may prove correct — but it leaves the tape exposed to any headline that breaks the diplomatic optimism.

Pakistan’s outright rejection of Trump’s call for Arab nations to join the Abraham Accords, with a source telling Reuters the two issues were “not interlinked and cannot be made so,” is a reminder that the diplomatic architecture around this deal is fragile beyond the bilateral U.S.-Iran track.

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Current Snapshot

Asset	Move	Level	Source
WTI (CL)	−5%	$91.87/bbl	CNBC
Brent (LCO)	+2.14%	$98.2/bbl	CNBC

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What Closes This Trade

Markets appear highly sensitive to short-term diplomatic developments. Rubio’s “few days” framing means the outcome of current negotiations  may arrive before the end of the week. Watch the Hormuz passage data from the EIA for any signal that shipping flows are already being disrupted by mine activity.

A signed agreement could narrow  the Brent-WTI spread which could place additional downward pressure on WTI prices still as Iranian supply re-enters the calculus. A breakdown in negotiations could materially alter current market positioning , with Brent potentially remaining highly sensitive to developments affecting Gulf shipping routes.

The USS Tripoli is still in the region. The F-35Bs are still flying. A deal that is “95% done” is also 5% away from not being a deal at all.

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Risk Disclaimer: Geopolitical events, military conflict, sanctions, and supply disruptions can lead to sudden and extreme market volatility across commodities, currencies, equities, and related derivatives. Market reactions to geopolitical developments may be rapid, unpredictable, and highly sensitive to evolving news flow. References to market behaviour, asset correlations, or potential scenarios are illustrative only and should not be interpreted as forecasts or trading recommendations.. This content is for informational and educational purposes only and does not constitute investment advice.

Inflation-related market positioning appeared to shift  on Monday — and gold appeared to benefit from the move. . Spot gold rose 1.1% to $4,559.07 per ounce as of 0736 GMT, while June delivery futures gained 0.8% to $4,559.80, as currency markets digested the prospect of a US-Iran memorandum of understanding that could reopen the Strait of Hormuz. Oil prices fell to two-week lows on that same read. Lower crude tends to soften near-term inflation expectations — and softer inflation expectations push back against the case for keeping rates elevated, which may reduce one of gold’s longer-term headwinds.

The catalyst traces back to Saturday. Trump described Washington and Tehran as having “largely negotiated” a peace deal, a phrase markets appear to have weighted more heavily than his Monday caveat that he was “in no hurry” to finalise anything. That tension — between a headline-driving presidential statement and a walk-back that followed within 48 hours — is exactly the kind of noise that tends to keep safe-haven positioning alive rather than dissolve it.

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The Strait of Hormuz Read, and Why It Points Both Ways

The logic driving Monday’s gold move, as Tim Waterer, chief market analyst at KCM Trade, told CNBC, runs through oil: “Trump has been raising market hopes for some sort of deal with Iran, which could lead to the reopening of the Strait of Hormuz. That prospect has weighed on oil prices and, by extension, given gold a welcome lift from an inflation perspective.”

That framing matters. Part of gold’s move may reflect interest-rate expectations alongside geopolitical positioning . If a credible Hormuz deal lowers Brent, the inflation print softens, the front-end pricing on Federal Reserve action shifts, and non-yielding assets like gold become relatively more attractive. The dollar — already around its lowest levels of the week by the time London opened, per CNBC — added further mechanical support, since dollar weakness makes greenback-priced bullion cheaper for holders of other currencies.

The broader precious metals complex moved decisively with gold. Spot silver climbed 3.1% to $77.79 per ounce, platinum rose 2.3% to $1,966.59, and palladium was up 2.7% at $1,384.70. Silver’s outperformance — nearly three times gold’s percentage gain — is consistent with the industrial demand angle in silver positioning, separate from any safe-haven read. Historically, silver has at times shown larger percentage moves than gold during periods of broad dollar weakness . Monday’s market activity appeared broadly consistent with that pattern 

Asset	Move	Level (0736 GMT)
Spot Gold (XAU/USD)	+1.1%	$4,559.07 / oz
Gold Futures (June, GC=F)	+0.8%	$4,559.80 / oz
Spot Silver	+3.1%	$77.79 / oz
Platinum	+2.3%	$1,966.59 / oz
Palladium	+2.7%	$1,384.70 / oz

Source: CNBC, as of 0736 GMT, 25 May 2026

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The Warsh Factor — Regime Change at the Fed

There is a second layer to Monday’s gold story that the Iran headlines risk obscuring. Kevin Warsh was sworn in as Federal Reserve chair on Friday, stepping into the role at what the CNBC report characterises as a pivotal moment — surging gasoline prices tied to the Iran conflict have been fuelling inflation and eroding consumer sentiment simultaneously. That is a difficult inheritance for any incoming chair: tighten into a consumption slowdown, or tolerate an inflation overshoot in the hope that a deal cools energy prices.

A potential Hormuz reopening could, in theory, give Warsh a cleaner hand on his first move. Lower oil prices and softer inflation data could potentially give policymakers greater flexibility.  Markets may be running that scenario. If that read is correct, then Monday’s gold rally is not just a geopolitical trade — it is also an early positioning bet on the direction of US monetary policy under a new chair.

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The Obvious Bear Case

The counter here is straightforward: diplomatic momentum in US-Iran talks has stalled and reversed before, and Secretary of State Marco Rubio’s Monday statement — that the US will either have a “good agreement” or deal with Iran “another way” — is not language that typically precedes a signed deal. If the MOU framing collapses over the coming days, oil recovers, the inflation read firms back up, and support for gold linked to rate-relief expectations could weaken . The dollar’s recent weakness may also be shallow; a single week’s move at “around its lowest levels” is not a structural repricing.

Gold has historically held up even when the initial geopolitical catalyst fades, because the underlying rate and dollar dynamics have at times persisted independently of the initial geopolitical catalyst.. But that pattern is not guaranteed to repeat, and a deal that fails to materialise could lead to increased short-term volatility or partial reversal. 

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What’s Next

Traders watching this position will be focused on any further statements from the US or Iranian delegations on the MOU’s status. On the monetary policy side, scheduled FOMC calendar events and any public remarks from incoming Fed Chair Warsh will be the primary variables that either reinforce or undercut the rate-relief narrative currently supporting gold. For energy market updates that feed directly into the inflation-via-oil channel, the EIA weekly petroleum supply report provides the most current inventory read.

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Risk Disclaimer: Trading CFDs involves substantial risk and may result in the loss of your invested capital. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not indicative of future results. This content is for informational and educational purposes only and does not constitute investment advice.

The Strait of Hormuz has been functionally closed since late February, and oil is pricing that reality at over $100 a barrel — the next major driver for oil prices may not be physical supply figures alone 

Brent crude traded 1.9% higher at $106.92 per barrel during afternoon London dealing on Thursday, while WTI pushed 2.4% higher to $100.59 — both contracts are now up roughly 45% since U.S. and Israeli-led strikes on Iran began on 28 February. The move higher came as Iran’s Foreign Ministry spokesperson Esmaeil Baghaei confirmed the Islamic Republic had received Washington’s latest proposal and was reviewing it, according to Sam Meredith at CNBC. That’s a fractionally softer tone than an outright refusal — and the tape responded accordingly.

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What’s Actually on the Table, and Who’s in the Room

Pakistan’s Army Chief, Asim Munir, was due to travel to Tehran on Thursday to continue mediating between Washington and Tehran, according to Iran’s ISNA news agency cited by CNBC. Pakistan hosted earlier rounds of talks last month and has become the central conduit for written exchanges — Baghaei confirmed “several rounds of communication” had taken place based on Iran’s original 14-point framework. The fact that exchanges are still passing through an intermediary, rather than direct bilateral talks, suggests significant differences between the two sides may still remain 

Trump’s language at Joint Base Andrews on Wednesday did nothing to narrow it. “Believe me, if we don’t get the right answers, it goes very quickly. We’re all ready to go,” Trump told reporters. Asked how long he’d wait: “It could be a few days, but it could go very quickly.” The following morning, he said he’d been an hour away from ordering a strike on Tuesday before postponing. This pattern — deadline set, deadline deferred, rhetoric escalated — has repeated enough times that markets have learned to discount the threat slightly, but not to ignore it. The 2.4% WTI move on Thursday suggests market participants appear cautious about positioning aggressively against the move.

Iran’s Revolutionary Guard raised the stakes further with a statement, reported on Wednesday, threatening to extend the conflict “beyond the region” if U.S. and Israeli strikes resume. That language — directed at broader escalation rather than just Hormuz — is the sentence traders should be watching most carefully. A regional spillover that draws in Gulf producers complicates supply assumptions that already assume Hormuz stays blocked.

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The 45% Rally Has a Structural Ceiling Problem

The 45% rise in both Brent and WTI since 28 February reflects a genuine structural disruption: around 20% of the world’s oil and liquefied natural gas passed through the Strait of Hormuz before the war, and shipping traffic has virtually halted since the conflict began. The move reflects both geopolitical sentiment and physical supply-chain disruption concerns. The UAE’s bypass pipeline, separately reported as nearly 50% complete, offers a partial future relief valve, but it’s not operational now, and “nearly 50%” doesn’t move barrels this week.

The supportive supply-side conditions for oil prices remain present  But the ceiling risk is real: any credible de-escalation signal — even a joint statement agreeing to continue talks — could lead to increased volatility or a reassessment of current price premiums . Traders who bought February’s dip are sitting on material gains, and the question is whether they hold through a diplomacy-driven whipsaw.

The DXY is the less obvious watch here. A genuine peace deal that reopens Hormuz would likely trigger a risk-on unwind, with the dollar giving back some of the geopolitical premium it may have accumulated. Conversely, a military strike resumption would probably bid the dollar sharply as a safe-haven destination, even as oil makes new highs.

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The Bear Case Isn’t Diplomacy — It’s Demand Destruction

At $106.92 Brent and $100.59 WTI, the demand-destruction math starts to bite. Sustained triple-digit oil has historically compressed airline operating margins, widened industrial input costs, and put consumer discretionary names with high-energy exposure under pressure — particularly in import-heavy economies without domestic production buffers.

That pressure doesn’t show up in one session’s price action; it accumulates over weeks of elevated crude costs and eventually feeds back into demand signals that could weigh on the very prices sustaining the rally. If the conflict drags through Q3 without resolution and demand data from Asia and Europe softens, the supply-shock bid may start competing with a demand-contraction headwind. That’s the scenario that could challenge the sustainability of current price levels.

There’s also the question of Trump’s negotiating consistency. The president has set and deferred strike deadlines multiple times since February. If Tehran concludes that Washington’s red lines are elastic, the incentive to make meaningful concessions on its 14-point framework diminishes — potentially extending the stalemate indefinitely and keeping both sides in a “neither war nor peace” equilibrium that leaves shipping volumes depressed without providing the demand clarity that energy markets need to set a durable price.

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Catalysts to Watch

• Pakistan’s Army Chief Asim Munir’s Tehran visit (Thursday, 21 May 2026) — any joint statement or confirmation of a formal response timeline from Iran would be the immediate catalyst. Silence is itself a data point.
• EIA weekly petroleum supply report — EIA data will continue to reflect the structural Hormuz disruption in U.S. import and storage figures. A widening inventory draw may extend the crude bid.
• Any Trump statement on Iran strike timelines — given the president’s own characterisation of “a few days,” any public comment before the weekend resets the risk premium across the Brent and WTI curves.

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Risk Disclaimer: Trading CFDs involves substantial risk and may result in the loss of your invested capital. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not indicative of future results. This content is for informational and educational purposes only and does not constitute investment advice.

WTI moved above the $100 level following reports regarding Iran’s uranium position and its potential implications for ongoing negotiations. Ayatollah Mojtaba Khamenei’s reported order that Iran’s enriched uranium must stay within the country was interpreted by markets as a setback to recent diplomatic progress 

Spencer Kimball at CNBC reported that two senior Iranian sources told Reuters the supreme leader issued the directive, putting Washington and Tehran back on opposite ends of a fundamental red line. U.S. crude (WTI) climbed 2.4% to $100.57 per barrel by 8:34 a.m. ET. Brent advanced nearly 2% to $107.05 per barrel. Both contracts are now up roughly 45% since the Iran war began on February 28, when U.S. and Israeli-led strikes halted shipping traffic through the Strait of Hormuz.

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The Strait Is the Story — and It’s Getting Worse

The Hormuz disruption has become a central factor in current oil market pricing .. Roughly 20% of the world’s oil and liquefied natural gas ordinarily transits the strait, and shipping activity through the strait has reportedly fallen sharply since the conflict began. The summary data supplied for this article puts physical oil flows through the strait at 95% below normal levels — a figure that frames every price move since late February.

President Trump called off imminent U.S. airstrikes on Iran earlier this week, citing requests from Gulf Arab allies who wanted more time for diplomacy. That brief window of de-escalation had already started to moderate Brent’s premium. Thursday’s directive from Khamenei reverses much of that softening. The uranium-retention position is being interpreted by some analysts as a significant obstacle in negotiations : without a credible path to removing or limiting Iran’s enriched stockpiles, the incentive for Washington to ease pressure — and for the Strait to reopen — contracts sharply.

ADNOC’s CEO, speaking in a video clip cited by CNBC, put a timeframe on the recovery problem: oil flows could take four months to return to 80% of pre-war levels, even after a hypothetical reopening. This suggests supply constraints could persist into the higher-demand summer period. .

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Birol’s “Red Zone” Warning Has a Date on It

IEA Executive Director Fatih Birol didn’t mince language at a Chatham House session on the Strait of Hormuz crisis Thursday. As Sam Meredith at CNBC reported, Birol warned that if the Strait fails to reopen and no new Middle Eastern oil comes online, oil markets “may be entering the red zone in July or August” as global stockpiles continue to erode and summer travel demand picks up.

The IEA had previously described this as the most severe disruption to global oil markets in its history. That language matters: the organisation coordinated the release of 400 million barrels from strategic reserves in March — the largest such action on record — specifically to absorb the initial shock. Birol said those surplus buffers, which the market was “fortunate” to have entering the conflict, are now eroding. There is no second SPR release of that magnitude sitting in reserve.

Lydia Rainforth, head of European equity strategy at Barclays, described the position bluntly in a CNBC interview Thursday:

“This is the largest supply outage that we’ve ever had. We’re now exceeding a billion barrels of lost production and that’s going to take a long time to … normalize, even if the Strait opens tomorrow.”

The MarketWatch analysis of the depletion rate makes the calendar pressure concrete: the combination of falling stockpiles and a seasonal demand uptick means the next six to eight weeks are the critical window. Birol’s comments underscore the timeframe markets are currently monitoring closely.

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A Billion Barrels Gone — Who Carries That Pain

Birol’s geographic framing was pointed. He said the “biggest pain of this crisis will be felt in developing Asia and Africa” — energy importers with less financial capacity to absorb $100+ crude and fewer strategic reserve buffers to draw on. That distinction matters for cross-asset positioning in EM names with heavy energy-import exposure.

For refining-heavy economies in Europe and East Asia, the shortage of Middle Eastern crude grades creates additional complexity: pipelines and refineries optimised for specific crude blends cannot simply substitute Atlantic Basin barrels without margin compression and infrastructure adjustment. Analysts and policymakers have also raised concerns about potential knock-on effects for food supply chains and transportation costs 

For energy equities, the picture is directionally straightforward: upstream producers outside the conflict zone — U.S. shale operators, North Sea names, and select LatAm producers — are operating into a structurally elevated price environment. Refinery margins, however, may diverge depending on crude access and feedstock costs, rather than moving uniformly with the headline Brent price.

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The Bear Case for This Rally

The 45% move in both crude benchmarks since February 28 is enormous. At some point, demand destruction becomes the correction mechanism that geopolitics can’t be.

Trump’s decision to pull back from airstrikes this week shows Washington has not closed the door entirely. Any credible signal from Tehran that the uranium position is a negotiating posture rather than a final directive could unwind a meaningful portion of the geopolitical premium quickly — these moves tend to be gappy on the downside when diplomatic windows reopen. Birol himself flagged the IEA’s readiness to coordinate additional strategic reserve releases, which could moderate a further supply squeeze without requiring the Strait to reopen. High prices are also beginning to incentivise production increases in non-OPEC basins that could partially offset the Hormuz shortfall over a 12-to-18-month horizon, even if July and August remain tight.

The move higher in crude prices has been significant and sustained. Any trader leaning long into this print should be aware that the tail scenario — a deal, or even a ceasefire — could lead to a rapid reassessment of geopolitical risk premiums in crude markets. 

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What’s Next

The near-term calendar is thin on scheduled macro catalysts — the Strait and the diplomatic channel are doing all the work. Traders should monitor:

• U.S.-Iran talks — Trump indicated earlier this week he was willing to wait “a few days,” making any communiqué from either side a live market catalyst with no fixed schedule.
• EIA Weekly Petroleum Status Report — the next print from the U.S. Energy Information Administration will update domestic crude stockpile data and refinery utilisation rates, offering a partial read on how SPR releases and import substitution are tracking.
• IEA Monthly Oil Market Report — the IEA’s next scheduled publication will be watched for any update to Birol’s July/August red-zone timeline; check the IEA calendar for the release date.

The Strait reopening remains, in Birol’s own words, the single most important solution. Until there is a credible path to that, market direction remains highly sensitive to developments surrounding negotiations and Strait of Hormuz shipping conditions. 

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