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Oil Slides as Middle East Uncertainty Keeps Markets on Edge

Concerns are growing in Europe about an economic recession as oil prices rise (Reuters)
Concerns are growing in Europe about an economic recession as oil prices rise (Reuters)
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Oil Slides as Middle East Uncertainty Keeps Markets on Edge

Concerns are growing in Europe about an economic recession as oil prices rise (Reuters)
Concerns are growing in Europe about an economic recession as oil prices rise (Reuters)

Oil reversed earlier gains on Wednesday as uncertainty over the situation in the Middle East unnerved markets and US President Donald Trump again suggested the US-Israeli war with Iran could be nearing an end.

The front-month Brent contract for June fell $1.06, or 1%, to $102.91 per barrel at 1106 GMT, having dropped to a session low of $98.35. US West Texas Intermediate crude futures for May slipped $1.44, or 1.4%, to $99.94 per barrel, after falling to $96.50 earlier.

Prices rose earlier on Wednesday but then uncertainty over the Middle East conflict prompted investors to lock in gains.

"Oil prices fell after US President Trump signalled a potential end to the war with Iran," ING said in a report.

Oil supply disruptions from the Middle East will increase in April and will hit Europe as the closure of the Strait of Hormuz hits exports further, International Energy Agency head Fatih Birol said on Wednesday.

Brent futures for June delivery settled down more than $3 on Tuesday following unconfirmed media reports that Iran's president was ready to end the war.

Trump told reporters on Tuesday that the US could end the military campaign within two to three weeks and that Iran does not have to make a deal to end the conflict, his clearest declaration yet that he wants to wind down the month-long war.

Still, analysts expect that energy flows through the Strait of Hormuz would be slow to return to levels before the conflict even if a ceasefire were announced.

"Even if the Strait reopens, clearing the vessel backlog would take time, with production, exports and LNG flows normalising only gradually rather than immediately," ING said.

According to a Wall Street Journal report, Trump has indicated he could end the war before reopening the Strait of Hormuz, the route through which 20% of global oil and liquefied natural gas trade flows.

"Even with diplomatic channels reportedly still active and intermittent comments from the US administration predicting a short end to the conflict, the combination of limited tangible diplomatic progress, continued maritime attacks and explicit threats against energy assets keeps supply risks skewed to the upside," LSEG analysts said in a note.

Illustrating the impact of the closure of the Strait of Hormuz, crude oil output from the Organization of the Petroleum Exporting Countries dropped by 7.5 million barrels per day in March compared with the previous month, as producers were forced to cut output because storage is full.

US crude oil output also fell, dropping by the most in two years in January after a severe winter storm knocked production offline, data from the Energy Information Administration showed on Tuesday.

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Oil Climbs Following Renewed US, Iran Strikes

The 'Al-Yarmouk' oil tanker sails in the Arabian Gulf waters, off the coast of Kuwait City on June 27, 2026. (Photo by YASSER AL-ZAYYAT / AFP)
The 'Al-Yarmouk' oil tanker sails in the Arabian Gulf waters, off the coast of Kuwait City on June 27, 2026. (Photo by YASSER AL-ZAYYAT / AFP)
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Oil Climbs Following Renewed US, Iran Strikes

The 'Al-Yarmouk' oil tanker sails in the Arabian Gulf waters, off the coast of Kuwait City on June 27, 2026. (Photo by YASSER AL-ZAYYAT / AFP)
The 'Al-Yarmouk' oil tanker sails in the Arabian Gulf waters, off the coast of Kuwait City on June 27, 2026. (Photo by YASSER AL-ZAYYAT / AFP)

Oil prices rose on Monday following days of tit-for-tat strikes by the U.S. and Iran that underscored the fragility of their interim peace deal and again slowed energy shipping through the Strait of Hormuz.

Brent crude futures climbed 45 cents, or 0.6%, to $72.44 a barrel at 0627 GMT while US West Texas Intermediate crude was at $70.05 a barrel, up 82 cents, or 1.2%, Reuters reported.

"There's still plenty of risk facing the oil market. Even so, participants appear to be ... focusing on what a continued recovery in oil ⁠flows would mean ⁠for the global balance," ING analysts said in a note on Monday.

"This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow."

Brent crude fell 10.6% last week, its third weekly decline, after crude shipments through the strait rose last week to their highest level since the US-Israeli war on Iran ⁠began in late February.

However, traffic has since slowed following renewed attacks on ships in the strait from Thursday that triggered strikes from the US and Iran in the worst escalation since they signed an interim peace deal.

Capping oil price gains, Iran and the US agreed to halt recent hostilities in the Gulf and renew talks regarding their dispute over the Strait of Hormuz, a US official said on Sunday.

Business

Gold Slips as Fresh US-Iran Strikes Boost Oil, Fed Rate-hike Bets Weigh

AFP_96Gold bars weighing 1000 grams each are displayed at the Austrian Gold and Silver Refinery _Oegussa_ in Vienna
AFP_96Gold bars weighing 1000 grams each are displayed at the Austrian Gold and Silver Refinery _Oegussa_ in Vienna
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Gold Slips as Fresh US-Iran Strikes Boost Oil, Fed Rate-hike Bets Weigh

AFP_96Gold bars weighing 1000 grams each are displayed at the Austrian Gold and Silver Refinery _Oegussa_ in Vienna
AFP_96Gold bars weighing 1000 grams each are displayed at the Austrian Gold and Silver Refinery _Oegussa_ in Vienna

Gold prices eased on Monday as recent US-Iran strikes in the Gulf pushed oil prices higher, while expectations of US Federal Reserve interest rate hikes further weighed on the non-yielding metal, Reuters reported.

Spot gold was down 0.8% at $4,057.77 per ounce, as of 0602 GMT. US gold futures for August delivery lost 0.6% to $4,072.20. The metal was headed for a ‌fourth consecutive monthly ‌loss of 10.5%.

"US and Iran were at ‌it ⁠again over the ⁠weekend, with fresh military strikes reported from both parties, which casts further doubt over how long oil can stay at these subdued levels and therefore over the broader inflation and interest rate outlook," said Tim Waterer, chief market analyst at KCM Trade.

Oil prices rose after Iran launched missiles and drones at US military sites in Kuwait ⁠and Bahrain early on Sunday, shortly after US President ‌Donald Trump threatened to wipe ‌out the Iranian leadership if they did not stick to the agreement ‌to end their war.

However, Tehran and Washington agreed to halt recent hostilities ‌in the Gulf and renew talks regarding their dispute over the Strait of Hormuz, Axios reported on Sunday.

Elevated crude oil prices can fuel inflation and chances of interest rate hikes, and while gold is typically ‌seen as an inflation hedge, it loses its appeal as a non-yielding asset in a high interest-rate ⁠environment.

Traders expect ⁠three Fed rate hikes this year and are pricing in an about 80% chance of a December increase, according to the CME FedWatch Tool.

Investors are now looking out for June's ADP employment data and the US nonfarm payrolls data, both due later this week, to further gauge the Fed's monetary policy stance.

"Gold could see the $5,000 level again this year but this would be based on further de-escalation, oil having a sustained move to pre-war levels to dull the inflationary impact of the conflict, and a softer dollar," said Waterer.

Spot silver fell 0.9% to $58.64 per ounce, while platinum gained 0.1% to $1,616.55 and palladium rose 1% to $1,221.29.

Business

Bousso: Hormuz Oil Exodus Sets Stage for Chaotic Rebalancing Act

Vessels at the Strait of Hormuz, as seen from Musandam, Oman, June 24, 2026. REUTERS/Stringer
Vessels at the Strait of Hormuz, as seen from Musandam, Oman, June 24, 2026. REUTERS/Stringer
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Bousso: Hormuz Oil Exodus Sets Stage for Chaotic Rebalancing Act

Vessels at the Strait of Hormuz, as seen from Musandam, Oman, June 24, 2026. REUTERS/Stringer
Vessels at the Strait of Hormuz, as seen from Musandam, Oman, June 24, 2026. REUTERS/Stringer

Crude prices may ‌be back near levels seen before the Iran war, but the surge in oil exports from the Middle East following the reopening of the Strait of Hormuz is creating a chaotic market that could take months to settle. The steep slide in Brent crude back to pre-war levels of around $73 a barrel following the US-Iran interim deal might, at first glance, suggest business as usual has returned to the world’s most important oil and gas hub. The narrow waterway, which once carried about a fifth of global oil and gas, had been effectively paralyzed by conflict for more than 100 days, Ron Bousso, a columnist for Reuters says.

But beneath the surface, the market is anything but orderly. What looks like normality is a system trying to reboot all at once. First, there’s the race to liberate trapped volumes. Dozens of tankers stranded inside the Gulf during the war have rushed to leave in recent days. US Energy Secretary Chris Wright said flows briefly exceeded pre-war levels of around 20 million barrels per day, though ship-tracking data suggests overall traffic remains far below the roughly 125 daily crossings seen before the conflict. Some vessels appear to be disabling tracking systems during transit, further clouding the picture.

Whatever the precise numbers, one thing is clear: more Middle Eastern oil is hitting the market.

But clearing outbound cargo is only half the equation.

Inbound tankers are needed to load crude ‌sitting in onshore storage, ‌a key step in allowing producers to restart fields and refineries shut during the war. Without that inflow ‌of vessels, the ⁠recovery in supply ⁠cannot proceed smoothly.

The constraint should be short-lived. Consultancy Rystad Energy estimates that shut-in production across the Gulf fell to 9.6 million bpd by mid-June from 11.7 million bpd three weeks earlier, and the region is now expected to return to pre-war output by December. Perhaps an even bigger factor complicating the supply outlook is Iran. Tehran is expected to quickly ramp up oil production after the US suspended most sanctions restricting Iran's oil exports and sales.

Iran's oil output could reach 3.3 million bpd by year-end, above pre-conflict levels, if the sanctions relief stays in place, according to Rystad.

Logistics aside, a flood of oil appears likely to hit markets.

FROM SHORTAGE TO GLUT

That surge is running headlong into weak short-term demand. Refineries in Asia and Europe ⁠have already largely secured their crude supplies for July and August, leaving the extra barrels with nowhere to go.

Many ‌tankers may therefore have little choice but to remain at sea, effectively turning into floating storage and ‌keeping those barrels off the market for weeks. Having endured the largest oil supply shock in history, the market may soon face the opposite problem.

Indeed, investors appear to be ‌pricing in a short-term "mini glut." Last week, August Brent futures traded below the September contract, flipping into a market structure, known as contango, for the first ‌time since the war began on February 28.

That contango could persist for several weeks as the backlog of oil trapped in the Gulf is gradually cleared. But it is unlikely to last. Once flows normalize, the market will require enormous volumes of crude to both meet recovering demand in Asia and refill inventories around the world that have been depleted during the conflict.

Does that mean supply and demand will easily shift back into balance? Probably not.

While global supply is forecast to fall by 3.9 million bpd in 2026, it is expected ‌to rebound by about 8 million bpd in 2027 to roughly 110.3 million bpd, according to the International Energy Agency.

Demand, by contrast, is expected to recover far more modestly, creating a potential surplus of roughly 5 million ⁠bpd next year.

This scenario may not play ⁠out, given the physical constraints of the oil supply chain, but the scale of the potential supply-demand mismatch suggests the market faces a very bumpy ride ahead.

LINGERING RISKS

While exports may be surging now, concerns about the future of the Strait of Hormuz are already resurfacing.

Under the US-Iran interim deal, transit through the waterway is supposed to be unimpeded and toll-free for 60 days, while Tehran negotiates with Oman over a longer-term framework to govern traffic. That temporary arrangement leaves plenty of room for uncertainty.

A stark reminder came in recent days, when Iranian forces fired on a Taiwanese cargo vessel transiting the strait on Thursday, sparking a round of tit-for-tat strikes with the United States. The incidents appeared less an escalation than a signal: Tehran intends to assert its authority through the newly created Gulf Strait Authority.

Although traffic resumed quickly after the incident, many shipowners and charterers are likely to remain wary of sending vessels back into the Gulf.

That caution is already showing up in flows. For every four tankers leaving the region last week, only one entered, far below pre-war levels, according to LSEG data.

Markets appear to be shrugging off concerns about political risks, logistical problems or lasting changes in the region.

But after months of severe disruption, the road back to balance is unlikely to be smooth. That suggests today’s market optimism might be overdone.