Global crude oil markets closed sharply higher on Monday, posting a more than 4% gain after reports emerged that Iran has suspended indirect negotiations with the United States, and regional military alliances led by Tehran are planning a potential full blockade of the strategically critical Strait of Hormuz — a move that has drastically escalated already fraught geopolitical tensions across the Middle East.
The latest developments unfolded against a backdrop of rapidly worsening regional conflict: recent rocket and drone strikes targeted Kuwait, while Israeli forces have pushed deeper into Lebanese territory in their ongoing campaign against Iran-backed Hezbollah. The Strait of Hormuz, located between Iran and Oman, is one of the world’s most vital chokepoints for global energy trade, with roughly 20% of all globally traded crude oil passing through the waterway daily. Reports from Iranian state-linked news outlet Tasnim confirmed that Tehran and its so-called “Resistance Front” alliance — which includes militant and political partners across Yemen, Lebanon, and Iraq — have finalized plans to fully close the strait, and may also disrupt other key shipping lanes including the Bab el-Mandeb Strait at the southern entrance of the Red Sea. The Bab el-Mandeb alone carries between 4 million and 6 million barrels of Saudi crude oil exports daily, making any disruption there a second major shock to global supply chains.
By the close of trading on Monday, international benchmark Brent crude settled at $94.98 per barrel, up $3.86 or 4.2% from Friday’s close. Earlier in the session, prices surged more than 6% at their peak before partially pulling back, after former U.S. President Donald Trump said he had no confirmation that the indirect talks with Iran had been suspended. Trump also added that he had received assurances through intermediaries that Hezbollah would not launch new attacks against Israel, injecting a brief wave of cautious optimism into markets that tempered some of the day’s earlier gains.
Monday’s rally follows a brutal month for oil prices in May, when Brent and West Texas Intermediate (WTI) fell between 17% and 19% — marking the steepest single-month drop since March 2020, when the onset of the COVID-19 pandemic collapsed global energy demand virtually overnight. Even with Monday’s gains, market analysts remain split on the trajectory of prices through the second half of the year, as conflicting supply and demand pressures pull the market in opposite directions.
On the supply side, industry analysts warn that prolonged regional conflict and implemented blockades could rapidly drain global commercial crude inventories and trigger sharp price spikes within a matter of months. Compounding supply-side jitters, U.S. inventory data indicates that domestic crude stocks likely fell by 3.6 million barrels in the week ending May 31, according to early industry estimates. While Kazakhstan has restored crude production to 290,000 tons per day following earlier output disruptions, and Venezuela has slightly boosted its crude exports to the U.S., India and Europe in May, these incremental supply gains are far too small to offset a major disruption in the Strait of Hormuz.
On the demand side, however, slowing economic growth in two of the world’s largest crude importers — China and the Eurozone — has put persistent downward pressure on consumption and prices. Investment bank Goldman Sachs has already warned that weakening demand from these regions poses a major downside risk to its optimistic fourth-quarter Brent price forecast of $90 per barrel, even when accounting for potential Middle Eastern supply disruptions. Adding to downward pressure, Saudi Arabia is widely expected to cut its official selling price for crude cargoes headed to Asian markets for July, while Russia is considering internal restrictions on gasoline exports to meet growing domestic demand at home.
Shipping industry leaders gathered in Athens on Monday emphasized that any lasting resolution to regional tensions must include clear, binding guarantees to restore unimpeded commercial shipping through the Strait of Hormuz. The call for action comes amid new reports that Iran has recently re-laid naval mines in the strait, further raising safety risks for commercial vessels transiting the critical waterway.