Oil Heads for Weekly Gain as Iran War Resolution Stalls
Oil prices are on track for a weekly advance as the closure of the Strait of Hormuz persists amid stalled efforts to resolve the Iran war, disrupting global energy supplies.
Oil prices are heading for a weekly gain as the Strait of Hormuz remains effectively closed, with diplomatic efforts to end the Iran war at an impasse. The prolonged disruption has upended global energy markets, keeping supply tight and prices elevated. Brent crude futures have risen above $85 per barrel, while WTI has climbed past $80, widening the Brent-WTI spread to over $5 as the market prices in the heavier impact on seaborne grades. The closure has also pushed the market into backwardation, with near-term contracts trading at a premium to later months, signaling acute physical tightness.
The Strait of Hormuz is a critical chokepoint for global oil shipments, with about 20% of the world's petroleum passing through it daily. Its closure has removed a significant volume of supply from the market, amplifying fears of a sustained shortfall. Refiners are feeling the pinch as crack spreads—the margin between crude and refined products like gasoline and diesel—have widened sharply, squeezing profitability for those reliant on Middle Eastern grades. Meanwhile, the US Strategic Petroleum Reserve stands at its lowest level in decades after last year's historic drawdown, limiting the government's ability to intervene. Traders are closely watching the situation, as any escalation or resolution could trigger sharp price moves. NowPrice's live fuel dashboard allows traders to track real-time price changes in crude and refined products as the crisis evolves.
Looking ahead, market participants will focus on any diplomatic breakthroughs or military developments that could reopen the strait. Key data releases, such as weekly US crude inventory reports from the EIA, will also provide clues on how the disruption is affecting global stockpiles. Additionally, OPEC+ spare capacity remains a wildcard, as the group may consider adjusting output to compensate for lost Iranian supply. Saudi Arabia and Russia, the de facto leaders of the alliance, have so far signaled caution, but any coordinated move to tap spare barrels could cap further gains. On the demand side, China's marginal appetite for crude—already subdued amid a sluggish economic recovery—could soften further if the disruption drives prices too high, potentially dampening the rally. Traders should also watch for shifts in the contango/backwardation structure, which will reflect evolving supply-demand balances.