Brent crude prices surged on Thursday, with gains reaching nearly 7%, driven by reports that the United States is considering possible military action against Iran to break the deadlock in negotiations, which has increased concerns about further disruption to oil supplies from the Middle East, which is already suffering from severe restrictions.
Brent crude futures for June delivery rose $6.81, or 5.8%, to $124.84 a barrel, after gains of 6.1% in the previous session, as the contract continues its rise for the ninth consecutive day before its expiry. Meanwhile, the more actively traded July contract reached $113.78, up $3.34, or 3%, after a strong rally in the previous session.
As for US West Texas Intermediate crude, it rose to $109.64 a barrel, an increase of $2.76 or 2.6%, after jumping 7% in the previous session, recording gains in 8 out of 9 sessions, in a clear indication of the strength of the upward momentum in the market.
An upward trend that has been ongoing since the beginning of the year
Oil prices are on track for their fourth consecutive month of gains, with Brent crude more than doubling since the start of the year and hitting its highest level since March 2022, while West Texas Intermediate has risen by more than 90% over the same period, reflecting a radical shift in the market structure.
In this context, US President Donald Trump is expected to receive a briefing on possible plans to carry out a series of military strikes against Iran, in an attempt to push it back to the negotiating table regarding its nuclear program, according to a report by Axios.
The United States and Israel had begun airstrikes on Iran on February 28, and Tehran responded by almost completely shutting down shipping through the Strait of Hormuz, one of the world’s most important energy transit routes, while the United States later imposed a blockade on Iranian ports despite the ceasefire announcement.
Political deadlock deepens energy crisis
Negotiations to end the conflict remain stalled, as the United States insists on discussing the Iranian nuclear program, while Iran demands compensation for war damages and a role in controlling navigation in the Strait, which has led to a continued political stalemate.
In this context, Tony Sycamore, a market analyst at IG, confirmed that the chances of reaching a solution soon or reopening the Strait of Hormuz remain very slim, reinforcing concerns about the continuation of the crisis.
A White House official also indicated that the US administration has already begun discussions with oil companies about how to deal with the repercussions of a possible blockade that could last for months, in a clear indication that the crisis is expected to continue for a long time.
OPEC+ is under pressure, but the impact is currently limited.
In light of these developments, investors are primarily focused on the risks of a continued closure of the Strait of Hormuz and the impact of the US-Iran conflict, which currently outweighs any long-term repercussions of the UAE's exit from the OPEC+ alliance, according to Kelvin Wong, senior market analyst at OANDA.
The OPEC+ group is expected to agree to a limited production increase of around 188,000 barrels per day at its next meeting, but this increase appears insufficient to offset the significant supply shortage.
The UAE’s withdrawal from the organization, which will take effect on May 1, could weaken the alliance’s ability to control prices in the future, although its actual impact this year remains limited due to continued supply disruptions resulting from the war and the closure of the strait.
Is the demand under threat the solution?
Given this supply deficit, analysts have begun to view a decline in demand as the most likely scenario for restoring balance to the market, with ING Bank analysts predicting a drop in demand of around 1.6 million barrels per day as a result of some consumers ceasing to use petroleum products due to high prices.
Although this decline is significant, it is still insufficient to close the current supply gap, meaning the market will remain under strong pressure in the near term, with geopolitical risks continuing to drive prices to high levels.
