Brent crude prices rose strongly during Thursday’s trading, with gains reaching nearly 7%, after reports indicated that the United States is considering military options against Iran in an effort to break the deadlock in negotiations to end the war. This development increased market concerns over the possibility of further disruptions to oil supplies from the Middle East, at a time when exports are already facing clear restrictions and pressure.
Brent crude futures for June delivery rose by about $6.81, or 5.8%, to reach $124.84 per barrel, after posting strong gains in the previous session. The June contract continued its rise for the ninth consecutive session ahead of its expiry, while the more active July contract recorded $113.78 per barrel, up by around 3%. In the same direction, U.S. West Texas Intermediate crude rose to $109.64 per barrel, extending its gains in eight of the last nine sessions.
Oil prices are heading for a fourth consecutive monthly gain, supported by a sharp rise since the beginning of the year. Brent prices have more than doubled, reaching their highest levels since March 2022, while West Texas Intermediate has climbed by more than 90%. This performance reflects the intense tension in the market, with supply fears persisting and prices becoming increasingly sensitive to any new development in the Middle East file.
Markets are awaiting an expected briefing for U.S. President Donald Trump on potential plans to carry out military strikes against Iran, in an attempt to push Tehran back to the negotiating table over its nuclear program. The United States and Israel had launched airstrikes on Iran on February 28, before Tehran responded by almost completely shutting down shipping through the Strait of Hormuz, one of the world’s most important energy routes.
Although a ceasefire has temporarily paused the fighting, the United States imposed a blockade on Iranian ports, keeping pressure on the energy market at elevated levels. Talks between the two sides have stalled due to Washington’s insistence on discussing Iran’s nuclear program, while Tehran is demanding a role in managing the Strait of Hormuz and compensation for damages caused by the war.
Analysts believe that the chances of reaching a near term solution to the conflict or reopening the Strait of Hormuz remain limited, especially with ongoing signs of political and military escalation. The U.S. administration’s talks with oil companies on how to deal with a blockade that could last for several months also strengthen the view that the crisis may continue, leaving the energy market under pressure for a longer period.
In the near term, traders are focused on the course of the conflict between the United States and Iran, along with the risk of a prolonged closure of the Strait of Hormuz. These factors currently outweigh other developments in the oil market, including the potential decline in OPEC+ influence following the UAE’s exit from the organization.
OPEC+ is expected to discuss a limited increase in production quotas of around 188,000 barrels per day, but the ability of this increase to calm prices appears limited amid war related supply disruptions. The UAE’s withdrawal from OPEC, despite its long term importance, may not change market fundamentals this year as long as the Strait of Hormuz remains closed and production disruptions continue.
With supply remaining tight, analysts have started to consider demand destruction as one possible path toward restoring balance in the market. ING estimates point to a potential loss of around 1.6 million barrels per day in demand due to high prices, as consumers and companies reduce their use of oil products. However, this decline does not appear sufficient to close the current supply gap, meaning oil prices may remain supported as long as geopolitical risks persist.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
