June delivery Light Crude Oil Futures (WTI), the price is moving higher by over 2% today, currently trading at 103.45; meanwhile, ICE Brent Crude Futures are trading at 107.63, up 1.81%.
Oil prices remain high amid a lack of clear progress on the diplomatic front in the Middle East. Additionally, signs of escalation are reappearing following Trump’s recent remarks during his visit to China, expressing frustration with Iran.
This comes amid ongoing supply disruptions and Iran’s ability to maintain its firepower and close the Strait of Hormuz, which could cause even greater damage to energy supply chains.
President Trump has expressed growing impatience with Iran following high-level talks with Chinese President Xi Jinping.
While both leaders agreed on the necessity of keeping the Strait of Hormuz open and preventing Iran from acquiring nuclear weapons, the conflict remains at a diplomatic standstill. Iran continues to refuse demands to relinquish its enriched uranium stockpile, while simultaneously leveraging its control over the waterway.
As the war drags on, stockpiles will continue to dwindle worldwide, foreshadowing a catastrophe even deeper than the current one, despite partial adaptation by regional oil exporters through alternative routes that would restore some balance to the market. Global oil inventories are vanishing at a record pace, threatening to upend the relative calm in energy markets since the closure of the Strait of Hormuz. According to The Wall Street Journal, citing the International Energy Agency, global stockpiles plunged by 250 million barrels across March and April, a volume equal to roughly 2.5 days of global use. While an initial surplus and emergency releases from the International Energy Agency have cushioned the blow, Ellen Wald of the Atlantic Council’s Global Energy Center warns that “when inventories run out, they are going to run out.” This could potentially send prices toward $140 a barrel, per Capital Economics estimates.
The runway to avoid “tank bottoms” is rapidly shortening, with JPMorgan Chase estimating that wealthy nations could hit operational stress levels by early next month. Even a swift diplomatic resolution would not provide immediate relief; Tamas Varga of PVM notes that supply is unlikely to recover for months, even if the strait opens tomorrow, due to the time required to clear mines and untangle logistics. Consequently, the current state of “managed scarcity” appears unsustainable as the world burns through its final safety net.
Meanwhile, the recent maritime incidents, including the sinking of an Indian cargo vessel, underscore Iran’s ability to enforce the blockade, while the diplomatic path is the only solution to this disruption, which seems so far from being achieved. Both sides of the conflict are still holding onto their maximalist demands.
Iran insists on keeping its ballistic missile and nuclear programs, as well as its control over the Strait of Hormuz, while the United States sees it as a total defeat and a failure to achieve any of its wartime goals. Between the hardline Iranian leadership and the firm stance taken by the U.S., there is no sign of a diplomatic resolution to this war anytime soon, and it will eventually keep oil prices higher for longer.
With this narrative, there is a window for Trump to escalate again over the weekend after the market closes, which could be followed by a sharp upward surge at the start of trading next week.
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