The rally was supported by U.S. inventory data showing a mixed but ultimately bullish picture. While crude stocks increased by 1.9 million barrels, both gasoline and distillate inventories posted larger-than-expected draws, signaling firm downstream demand and ongoing strain in refined product markets.

Geopolitical risks also intensified, adding to the market’s risk premium. Reports of gunfire attacks on multiple container ships in the Strait of Hormuz, along with vessel seizures by Iranian forces, underscored the continued instability in a key global energy chokepoint. The waterway, which previously handled roughly 20% of global oil and LNG flows, remains heavily restricted.

Diplomatic progress remains limited. Although the U.S. signaled an indefinite extension of the ceasefire, the move appears unilateral, with Iran indicating that a full truce is incompatible with the ongoing U.S. naval blockade. The lack of coordinated de-escalation continues to cloud the outlook for any meaningful restoration of oil flows.

Broader regional tensions persist, with renewed conflict activity in Lebanon further complicating the geopolitical backdrop and increasing the risk of spillover disruptions.

On the supply side, additional uncertainty is emerging from shifting trade flows. Russia is set to reroute some crude exports away from Europe, while temporary U.S. sanctions relief on seaborne Russian oil highlights growing concerns among import-dependent economies facing supply shortages.

Overall, oil markets remain highly sensitive to both physical supply signals and geopolitical developments. While refined product draws are offering near-term support, sustained price direction will depend on whether disruptions in the Strait of Hormuz ease and whether meaningful progress is made in U.S.-Iran negotiations.

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The market remains focused on whether talks will materialize before the ceasefire expires, with Iran yet to confirm its attendance. At the same time, U.S. messaging has signaled readiness to escalate if a deal is not reached, reinforcing uncertainty around the near-term outlook.

Supply conditions remain highly constrained. Traffic through the Strait of Hormuz continues to run at minimal levels, with only a handful of vessels transiting the waterway in the past 24 hours. The prolonged disruption has already removed a significant volume of oil from the market, tightening global balances.

Broader regional tensions also persist, adding to geopolitical risk. Meanwhile, global markets are beginning to feel the economic effects of higher energy prices, with signs of strain emerging across Europe and continued strength in U.S. fuel-driven spending.

On the supply side, attention is turning to weekly U.S. inventory data, with expectations for another crude draw that would signal ongoing demand strength and limited near-term supply relief.

Overall, oil markets remain highly reactive, with price direction tied closely to developments around negotiations, the status of the ceasefire, and the pace at which disrupted supply may eventually return.

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The latest gains were driven by escalating tensions over the weekend, including the seizure of an Iranian vessel by U.S. forces and subsequent threats of retaliation from Tehran. These developments have cast doubt on the durability of the ceasefire and the likelihood of near-term progress in negotiations.

With the current ceasefire set to expire soon, markets are increasingly focused on whether talks will resume and lead to a more lasting resolution. Uncertainty around a potential extension, alongside continued military posturing, has reintroduced a risk premium into prices.

Shipping activity through the Strait of Hormuz remains severely limited, with traffic running at a fraction of normal levels. The persistence of restrictions—effectively creating a dual blockade dynamic—continues to constrain global supply, reinforcing volatility in crude markets.

While some vessel movement has been recorded in recent days, flows remain inconsistent, and the path toward normalization is unclear. As a result, market sentiment remains highly reactive to geopolitical developments.

Despite the recent rebound, prices are still below the peaks reached earlier in the conflict. Longer term, even in the event of de-escalation, supply restoration is expected to be gradual, suggesting that prices may remain elevated relative to pre-conflict levels.

Overall, oil markets continue to be driven by shifting expectations around the conflict, with price direction closely tied to developments in negotiations, the status of the ceasefire, and the pace of recovery in global oil flows.

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The selloff followed confirmation that commercial vessels would be allowed to transit the Strait of Hormuz during the ceasefire period, alongside indications that Iran would not seek to close the waterway again. Early shipping data showed a pickup in outbound traffic, reinforcing expectations that disrupted supply could begin returning to global markets.

Market sentiment shifted quickly as traders moved away from pricing in severe supply disruptions toward a normalization scenario. The reopening of the strait, even on a controlled basis, is viewed as a key step in restoring flows after weeks of significant outages.

Progress in diplomatic negotiations has further supported the move lower. Reports suggest that both sides are advancing toward a preliminary agreement aimed at ending the conflict, with additional talks expected in the near term.

Despite the sharp decline, some caution remains. The reopening process is still evolving, and logistical constraints—including transit coordination and shipping delays—are likely to slow the pace of normalization. In addition, underlying geopolitical risks persist, particularly if negotiations stall or key issues remain unresolved.

Regional supply dynamics also suggest that tightness may linger in certain markets, especially in Europe, where delivery timelines from the Gulf can extend several weeks.

On the supply side, U.S. drilling activity declined again this week, indicating some restraint from producers despite recent price volatility.

Overall, the market has shifted decisively toward pricing in improving supply conditions, though prices remain sensitive to the durability of the ceasefire and the pace at which global oil flows fully recover.

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The rally reflects persistent concerns over constrained flows through the Strait of Hormuz, where traffic remains significantly limited. The continued disruption—impacting a substantial share of global oil and LNG shipments—is tightening supply conditions as inventories are steadily drawn down.

Despite ongoing diplomatic efforts, market participants remain cautious about the likelihood of a comprehensive agreement. Current discussions appear to be focused on more limited arrangements aimed at preventing further escalation rather than fully restoring supply flows. As a result, prices showed little reaction to more optimistic political statements.

Supply constraints are increasingly visible in inventory data, with U.S. crude stocks posting an unexpected draw alongside declines in gasoline and distillate inventories, driven in part by stronger export demand as buyers seek alternatives to Middle Eastern supply.

Estimates suggest a significant volume of global oil flows remains disrupted due to the closure of the Strait, continuing to strain physical markets—particularly in regions reliant on imported fuels.

While there are indications that negotiations could resume in the near term, any meaningful recovery in flows is likely contingent on a broader agreement. In the interim, ongoing restrictions—including the U.S. blockade of Iranian exports—pose additional downside risks to supply.

Overall, the market remains supported by tight fundamentals and a sustained geopolitical risk premium, with price direction closely tied to developments in negotiations and the pace of any potential supply restoration.

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Market stability reflects a balance between tentative signs of de-escalation and ongoing constraints on global supply. Discussions around a potential agreement have included provisions that could allow limited transit through parts of the Strait of Hormuz, though a full normalization of flows remains uncertain.

More than six weeks into the conflict, traffic through the strait remains significantly below normal levels, with only a small portion of typical volumes moving through the waterway. While there are indications of a gradual increase in tanker activity, flows continue to recover unevenly rather than rebounding quickly.

At the same time, cumulative supply losses from the Middle East have been substantial, underscoring the scale of disruption still embedded in the market. Ongoing restrictions—including the U.S. blockade on Iranian exports—continue to limit available supply.

Recent data suggests the market is no longer pricing in a complete outage, but a residual risk premium remains as supply recovery progresses slowly.

On the macro side, the broader economic impact of the conflict continues to build. Policymakers have flagged risks to global growth, while higher energy prices and supply chain disruptions are contributing to inflationary pressures. Several countries are already taking steps to secure additional energy supplies and strengthen reserves.

In the U.S., a surprise draw in crude inventories provided some underlying support to prices, pointing to continued demand resilience despite elevated price levels.

Overall, the market remains in a holding pattern, with prices stabilizing as traders weigh gradual supply improvements against lingering geopolitical risks and an uncertain path toward a lasting resolution.

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Brent crude fell $4.57, or 4.6%, to settle at $94.79 per barrel, while U.S. West Texas Intermediate (WTI) dropped $7.80, or 7.9%, to $91.20. The decline follows gains in the previous session, when prices rose on news of expanded U.S. military actions in the region.

The selloff reflects growing expectations that negotiations could lead to a de-escalation and eventual reopening of the Strait of Hormuz, a critical artery for global crude and refined product flows. Sentiment has shifted toward a more constructive outlook, with markets increasingly pricing in the possibility of improved supply conditions.

However, underlying fundamentals remain tight. The closure of the Strait of Hormuz and ongoing attacks on energy infrastructure have resulted in a significant loss of global supply, with disruptions reaching historic levels in recent months. As a result, the market continues to balance optimism around diplomacy with the reality of constrained physical flows.

The potential resumption of negotiations remains a key focal point. While discussions are expected to continue, uncertainty persists regarding their outcome and timing. Market participants note that without a meaningful restoration of flows through the Strait, supply pressures could quickly re-emerge.

Additional risks remain on the supply side, including the potential for further escalation tied to the expanded U.S. naval presence and Iran’s threats to target regional infrastructure.

At the same time, updated forecasts point to a softer outlook for both supply and demand growth, reflecting the broader economic impact of elevated energy prices and ongoing geopolitical instability.

Overall, while easing geopolitical tensions have driven the recent pullback in prices, the market remains highly sensitive to developments around negotiations and the pace at which disrupted supply can return to global markets.

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Brent crude gained $4.16, or 4.4%, to settle at $99.36 per barrel, while U.S. West Texas Intermediate (WTI) rose $2.51, or 2.6%, to $99.08. Both benchmarks pulled back from earlier gains, with Brent up more than $8 and WTI more than $9 at session highs, highlighting ongoing volatility.

The market reaction reflects renewed concern over supply disruptions tied to restricted flows through the Strait of Hormuz, a critical transit route for approximately 20% of global oil and LNG shipments. Traffic through the strait remains significantly below normal levels, underscoring the scale of the disruption.

Despite elevated prices in physical markets, futures trading has been more cautious, with sentiment influenced by shifting geopolitical signals and uncertainty around the trajectory of the conflict.

Rising energy costs are increasingly impacting the global economy. Fuel prices have climbed sharply, prompting demand adjustments in key regions, while governments are implementing measures to offset higher energy costs. At the same time, demand expectations have been revised lower in the near term.

Physical crude markets remain exceptionally tight, with spot prices for immediate delivery reaching record levels, well above futures benchmarks. This divergence suggests continued strain in prompt supply availability.

On the policy side, there is potential for additional supply from strategic reserves if conditions worsen, though such measures have not yet been fully deployed.

Overall, the market remains highly sensitive to geopolitical developments, with price direction driven by expectations around supply disruptions, the effectiveness of the blockade, and the potential for renewed diplomatic progress.

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The sharp pullback follows earlier optimism around a temporary ceasefire agreement, though prices continue to hover near $100 per barrel amid ongoing supply uncertainty. Flows through the Strait of Hormuz remain severely constrained, with traffic still running well below normal levels and limited signs of a near-term normalization.

Market participants remain focused on whether transit through the strait can meaningfully resume. Without a recovery in Gulf exports, the risk of renewed price strength remains elevated despite recent losses.

Underlying supply conditions remain tight. A significant portion of Middle Eastern production has been shut in due to storage constraints and export disruptions, with outages expected to increase further in the near term. The scale of these disruptions is shifting the global balance toward a supply deficit, reversing earlier expectations of surplus.

Additional risks persist, including reduced Saudi production capacity following infrastructure damage and continued uncertainty around regional stability. Physical crude markets remain particularly tight, with spot prices reaching record levels in some regions.

At the same time, there are early signs of positioning for a potential recovery in flows, with producers and refiners preparing for the eventual reopening of key export routes.

Elsewhere, policy developments may provide limited offsets. The U.S. is expected to extend waivers allowing some purchases of sanctioned Russian crude, while Russian exports have shown signs of resilience despite infrastructure disruptions.

In the U.S., the active rig count declined again this week, pointing to some caution among producers despite elevated price levels.

Overall, while the ceasefire-driven selloff has eased prices from recent highs, the market remains highly sensitive to developments around the Strait of Hormuz and the broader trajectory of supply restoration.

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Early in the session, prices rallied more than 5% amid concerns that the ceasefire between the U.S. and Iran may not hold, particularly as restrictions on shipping through the Strait of Hormuz persisted. Sentiment later softened after signs of broader regional de-escalation, including plans for direct negotiations involving Lebanon.

Despite the ceasefire, tanker traffic through the Strait remains significantly constrained, running at a fraction of normal volumes as Iran continues to exert control over transit conditions. The waterway, which typically handles around 20% of global oil and gas flows, remains a central factor in market direction.

Adding to supply concerns, reports of damage to Saudi energy infrastructure have raised fresh questions about export capacity. Disruptions to both production and key pipeline routes suggest that even if maritime flows resume, alternative supply channels may remain limited in the near term.

The market continues to grapple with the reality that risks to supply are unlikely to dissipate quickly. Even with a formal ceasefire in place, elevated security concerns, potential mine threats, and higher insurance and freight costs are expected to weigh on the pace of normalization.

Regional instability remains a key overhang, with continued reports of strikes and infrastructure attacks underscoring the fragility of the current environment.

Reflecting the shift in near-term expectations, some market forecasts have been revised lower, with projections now pointing to crude prices averaging in the high-$80s to low-$90s range in the coming quarter, assuming a gradual recovery in supply flows.

Overall, while prices have pulled back from recent highs, the market remains highly sensitive to geopolitical developments, with volatility likely to persist as clarity around supply restoration and ceasefire durability evolves.

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