Oil prices surged on Monday, with Brent crude climbing to a three-week high of $107.97 per barrel during Asian trading hours, as peace negotiations between the United States and Iran collapsed. The breakdown has once again focused attention on the Strait of Hormuz, a narrow but critical chokepoint for global oil shipments, where tanker traffic has been severely curtailed.
By 0453 GMT, Brent had eased to $106.68, still up 1.3% on the day. West Texas Intermediate (WTI), the primary US crude benchmark, rose 1% to $95.35. The previous week had already seen Brent spike nearly 17% and WTI jump roughly 13%, marking their steepest weekly gains since the onset of the conflict. Kpler shipping data indicated that only a single oil-products tanker entered the Gulf on Sunday, underscoring the disruption.
Analysts noted that the limited shipping through the Strait of Hormuz is now translating into real supply constraints. Refiners are paying higher prices, and those costs are increasingly being passed on to consumers at the pump. Central banks, already grappling with persistent inflation, now face an additional headache from rising energy costs.
Goldman Sachs has revised its oil price forecasts upward, with its team led by Daan Struyven now projecting Brent at $90 per barrel and WTI at $83 for the fourth quarter of 2026. The bank cited tightening Middle East supply and warned that "economic risks are larger" than its baseline scenario, pointing to elevated refined product prices, supply squeeze worries, and the magnitude of the disruption. Goldman also pushed back its expectation for a return to normal Gulf exports via Hormuz from mid-May to the end of June, and now projects Middle East crude production losses of 14.5 million barrels per day. As a result, the bank sees the market balance flipping from a surplus of 1.8 million bpd projected for 2025 to a deficit of 9.6 million bpd in the second quarter of 2026.
The International Energy Agency (IEA) weighed in with its April report, slashing its 2026 global oil demand forecast. The agency now expects demand to shrink by 80,000 bpd, reversing its earlier call for growth. The IEA also reported a 10.1 million bpd drop in world oil supply for March, while observed inventories tumbled by 85 million barrels, driven by disrupted tanker traffic and damaged infrastructure.
US inventory data painted a mixed picture. For the week ended April 17, commercial crude inventories rose to 465.7 million barrels, according to the Energy Information Administration (EIA). Gasoline supplies fell to 228.4 million barrels, and distillate fuel stocks—which include diesel and heating oil—also declined to 108.1 million barrels.
Market forecasts remain divergent. ING analysts, cited by The Wall Street Journal, believe the stalled negotiations are tightening the market further. Citi Research, however, maintains a three-month Brent target of $120, now expecting the Strait of Hormuz to reopen only by the end of May.
The rally, however, is not without risks. Should the Strait of Hormuz see a genuine reopening, or if diplomatic efforts gain momentum—or demand collapses sooner than anticipated—prices could fall sharply. The IEA flagged that fuel consumption is already slipping due to high prices, and its own mid-year bounce-back scenario may be overly optimistic. For now, traders remain focused on diplomatic developments, with the immediate direction of oil prices hinging on shipping activity, negotiations, and statements from Washington or Tehran.
