Oil Rises as Iran Talks Stall Supply Risk Concerns

Key Moments

Brent crude rose to $106.21 and U.S. WTI advanced to $100.38, with both benchmarks building on gains of nearly 2.8% from the previous session.
Hopes for a ceasefire in the U.S.-Israeli war on Iran faded amid sharp differences between Tehran and Washington over key conditions.
Analysts warned that any renewed escalation or blockade threats around the Strait of Hormuz could drive Brent prices back toward $115+ per barrel.

Prices Extend Gains as Peace Prospects Dim

Oil futures advanced on Tuesday as traders grew more skeptical that negotiations to end the U.S.-Israeli war on Iran would yield a near-term agreement, reigniting concerns over crude supply.

By 0726 GMT, Brent crude futures had increased $2, or 1.9%, to $106.21 per barrel. U.S. West Texas Intermediate (WTI) crude gained $2.31, or 2.4%, to $100.38. Both benchmarks had risen nearly 2.8% on Monday.

U.S. President Donald Trump said on Monday the ceasefire with Iran was “on life support”, citing disagreements over issues including a halt to hostilities on all fronts, removal of a U.S. naval blockade, the resumption of Iranian oil sales and compensation for war damage.

Strait of Hormuz and OPEC Output Under Scrutiny

Tehran underscored its sovereignty over the Strait of Hormuz, a key shipping channel through which about a fifth of global oil and liquefied natural gas is transported.

DBS Bank energy sector team lead Suvro Sarkar noted that “Optimism regarding an imminent (peace) deal seems to be fading again and if we don’t see a deal by the end of May, then upside risks for oil prices are definitely on the table.”

Disruptions tied to the near-closure of the strait have led some producers to scale back exports. A Reuters survey on Monday showed that OPEC oil output in April declined to its lowest level in more than two decades.

Tim Waterer, chief market analyst at KCM Trade, said, “A genuine breakthrough toward a peace deal could trigger a sharp $8-$12 correction, while any escalation or renewed blockade threats would quickly push Brent back toward $115+.”

Market Impact: Price Scenarios and Supply Outlook

Scenario / Indicator	Detail
Brent crude futures	$106.21 per barrel, up $2 or 1.9%
U.S. WTI futures	$100.38 per barrel, up $2.31 or 2.4%
Previous session move	Both benchmarks climbed nearly 2.8% on Monday
Potential downside on peace breakthrough	$8-$12 correction in Brent, according to KCM Trade
Potential upside on renewed escalation	Brent “back toward $115+” on escalation/blockade threats

Saudi Aramco CEO Amin Nasser warned on Monday that disruptions to oil exports through the strait could postpone a return to market stability until 2027, with a potential loss of about 100 million barrels of oil per week.

U.S. Inventory Trends and Export Flows

On the U.S. supply side, crude inventories were expected by analysts in a Reuters poll to have fallen by around 1.7 million barrels in the previous week. [EIA/S]

The anticipated drawdown is occurring against “a backdrop of continued strong net waterborne export flows for crude and products, across the next several weeks,” according to Walt Chancellor, an energy strategist at Macquarie Group.

Geopolitics: U.S.-China Tensions and Energy Trade

Market participants were also tracking President Trump’s planned meeting with Chinese President Xi Jinping on Thursday and Friday, following Washington’s decision to impose sanctions on three individuals and nine companies accused of facilitating Iranian oil shipments to China.

Tariffs imposed during the U.S.-China trade war have halted most Chinese imports of U.S. oil and LNG, which were worth $8.4 billion in 2024, the year before Trump began his second term.