Oil prices edged higher in choppy trading on Monday, as escalating rhetoric between the U.S. and Iran offset ongoing indirect talks that could potentially lead to a de-escalation in hostilities. Brent crude settled at $109.77 per barrel, up 74 cents, or 0.7%, while U.S. West Texas Intermediate (WTI) rose 87 cents, or 0.8%, to $112.40.
Price action continues to hinge on developments surrounding the Strait of Hormuz, a critical transit point for roughly one-fifth of global oil and gas supply. For prices to ease meaningfully, any ceasefire would likely need to be accompanied by a full reopening of the waterway. In the meantime, major consuming regions—particularly in Asia—are adjusting by conserving supply and curbing demand in response to ongoing disruptions.
While ceasefire frameworks are being discussed through intermediaries, progress remains limited. Iran has resisted calls for an immediate reopening of the strait, despite mounting geopolitical pressure, though there are signs of partial easing. Select vessels have transited the waterway in recent days, suggesting a more flexible approach toward certain countries.
The market remains highly reactive to these developments, with sentiment shifting rapidly between de-escalation hopes and continued supply risk. Last week’s sharp rally—featuring double-digit gains in WTI and a strong move in Brent—underscores the degree of volatility currently embedded in the market.
Tight physical markets are also driving price strength. Refiners are actively seeking alternative crude supplies, with increased demand for U.S. and North Sea barrels. Spot premiums for WTI have surged to record levels amid heightened competition from both Asian and European buyers.
On the supply side, OPEC+ has agreed to a modest output increase for May, though the impact is expected to be limited given ongoing export constraints. Saudi Arabia has also raised its official selling prices for Asian buyers to record premiums, reflecting tight regional supply conditions.
Additional disruptions to Russian export infrastructure have added to the strain, though some recovery in flows is underway. Overall, the global oil market remains tightly balanced, with price direction continuing to be driven by geopolitical developments and the pace at which disrupted supply can return.