Oil prices climbed nearly 3% on Tuesday, extending their rally as persistent supply disruptions tied to the Strait of Hormuz outweighed bearish developments from the United Arab Emirates’ decision to exit OPEC+. Brent crude settled at $111.26 per barrel, up 2.8% and marking a seventh consecutive gain, while U.S. West Texas Intermediate (WTI) rose 3.7% to $99.93, briefly trading above $100 intraday.
The announcement that the UAE will leave OPEC+—a move that would typically signal additional supply—had limited impact on prices. With the Strait of Hormuz effectively constrained, the market is discounting near-term production increases, as additional barrels face significant challenges reaching global markets.
Supply conditions remain the dominant driver. Shipping activity through the Strait continues at a fraction of normal levels, with ongoing blockades and enforcement actions restricting flows. While some cargoes are still moving, a growing volume of crude remains stranded, with floating storage rising sharply in recent weeks—highlighting the bottleneck between production and delivery.
Diplomatic progress remains limited. U.S.-Iran negotiations appear stalled, with recent proposals failing to bridge key disagreements. The lack of a clear pathway toward reopening the Strait continues to reinforce expectations of prolonged supply disruption.
Broader supply risks are also building. Refining outages and infrastructure disruptions across multiple regions—including incidents in the United States and Russia—are compounding tightness in global fuel markets. At the same time, the potential return of additional refined product exports from Asia introduces another variable into an already complex supply picture.
The macro impact is becoming more pronounced. Rising energy prices are feeding into inflation pressures globally, with forecasts pointing to elevated price levels even under a gradual recovery scenario for Middle Eastern flows. Elevated gasoline prices in the U.S. further underscore the downstream effects of sustained supply constraints.
Until there is meaningful progress toward restoring flows through the Strait of Hormuz, supply-side risks are likely to continue underpinning prices and sustaining volatility.