Oil Prices Swing Between Renewed Negotiations and Mounting Risks
Oil prices fell below $107 a barrel on Tuesday, after Brent crude hit a five-month high at the start of trading the same morning. The pullback followed unconfirmed reports that Qatar and Pakistan had submitted a new proposal to resume negotiations, reviving hopes of ending the war on Iran and easing pressure on global oil markets. The move reflects just how sensitive oil markets are to any positive signal that could pave the way for a halt to the war.
By contrast, uncertainty persists over when energy supplies will return to normal, amid Houthi claims of attacks on Saudi oil facilities, as well as fears of a wider conflict in the Middle East. These developments fuel concerns over the security of energy infrastructure in the region and the additional disruptions to global oil supplies that could follow, keeping prices at elevated levels.
Oil prices continued to trade near a five-month high on Tuesday morning, even though crude flows from the Persian Gulf region remain relatively strong. That is driven by a rising geopolitical risk premium, amid the prospect of further Iranian attacks in the Strait of Hormuz and Houthi attacks in the Bab el-Mandeb, and so far there are no clear signs that this premium will recede in the near term.
Brent crude futures had risen by 0.28% to near $110 a barrel ahead of the opening of European markets, while West Texas Intermediate (WTI) crude traded above $104 a barrel for next-month delivery. That came even though crude flows from the Gulf have returned to roughly 80% of their pre-war levels, according to remarks by US Energy Secretary Chris Wright to Fox News, whereas supplies of refined products face tighter constraints.
While the Organization of the Petroleum Exporting Countries (OPEC) expects global oil demand to grow by 0.2 million barrels per day in 2026 and 2.6 million barrels per day in 2027, the International Energy Agency projects demand growth of 2 million barrels per day in 2027. This divergence reflects differing estimates over the trajectory of consumption and the impact of prices and geopolitical tensions on global economic activity.
These developments indicate that oil price movements are no longer determined by supply volume alone or by the pace of demand alone, but have instead become hostage to the interaction of geopolitical risks with transport and insurance costs, and the ability of markets to ensure the continuity of supplies. The record surge in tanker shipping costs is adding to financial burdens, while also keeping prices at elevated levels.
Against this backdrop, the United States is seeking to lower oil transport costs by lifting restrictions on sanctioned oil tankers, a move that could allow them to return to the regular market and boost available shipping capacity. Even so, it remains unclear how much extra capacity this measure could provide, or how quickly it might act to temper prices.
For its part, the International Energy Agency moved quickly to release the remaining volumes of emergency oil reserves to curb rising prices, including more than 20 million barrels of diesel. Yet that step was not enough to calm the market, after around 330 million barrels had already been released out of the more than 400 million barrels countries pledged to tap in March. This highlights the limited capacity of strategic stockpile drawdowns to offset supply disruptions if they persist for a prolonged period.
Spot liquefied natural gas prices in Asia, meanwhile, climbed to $30.4 per million British thermal units on Monday, their highest level since December 2022. That coincided with a report from United Kingdom Maritime Trade Operations that a liquefied natural gas tanker came under fire from a small boat off the coast of Yemen on Saturday, heightening concerns over the safety of energy shipments transiting the region.
European gas prices also traded near multi-year highs. Dutch natural gas (TTF) futures for next-month delivery stood below 88 euros per megawatt-hour on Tuesday morning, easing slightly from more than 89 euros shortly before 6 a.m., according to data from the Intercontinental Exchange (ICE).
Persistent tension in the Persian Gulf region and the growing risk of an escalating conflict in the Middle East threaten the security of regional energy infrastructure and compound disruptions to global oil supplies, while diplomatic efforts to end the Iran war appear to be little more than attempts to buy time in preparation for a new round of confrontation on the one hand, and to contain rising prices on the other.
Ultimately, energy markets are swinging between hopes of diplomatic de-escalation and risks of military escalation, while vital maritime corridors and energy infrastructure remain vulnerable to disruption. Exceptional measures, such as drawing down reserves or expanding shipping capacity, may help ease pressure temporarily, but they neither address the roots of the crisis nor guarantee long-term supply stability.
The most decisive path toward restoring stability to oil and gas markets remains reaching a political settlement that ends this senseless war and curbs the risks threatening energy flows. Continuing the confrontation, by contrast, will leave prices hostage to developments on the ground and volatile expectations, bringing further burdens for the global economy.
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Translated from Arabic with AI. Read it in Arabic