Both benchmarks have mostly traded around or above the $100-per-barrel level since the US and Israel launched attacks on Iran in late February, prompting Tehran to effectively close the Strait of Hormuz.
Crude Oil Price on May 13
Brent crude futures were down 82 cents, or 0.76%, at $106.95 a barrel by 0051 GMT, while US West Texas Intermediate crude was down 66 cents, or 0.65%, at $101.52 a barrel. Oil prices jumped more than 3% on Tuesday as hopes for a permanent cease-fire between the US and Iran weakened as expectations for the reopening of the strait weakened.
Trump said on Tuesday that he did not believe China’s support was necessary to end the war with Iran, even as the prospects for a durable peace deal appeared to worsen and Tehran tightened its control over the Strait.
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China remains the largest buyer of Iranian oil despite pressure from the Trump administration. Trump is scheduled to meet with Xi in Beijing on Thursday and Friday. The Iran conflict has also begun to weigh on the US economy, with higher crude prices driving up fuel costs. Economists expect broader second-round inflationary effects in the coming months.
The truce hangs in the balance as Trump said on Monday that the truce with Iran was “on life support”, citing disagreements over several issues, including ending hostilities on all fronts, lifting the US naval blockade, resuming Iranian oil exports and compensation for war-related losses.
Analysts at Morgan Stanley said the global oil market was now in a “race against time”, warning that factors preventing a sharp rally in crude prices could weaken if the Strait of Hormuz remains closed until June.
Despite the disruptions affecting nearly 1 billion barrels of oil supply, crude prices are still below the peak seen since Russia’s invasion of Ukraine in 2022. Analysts led by Martijn Rates said the market entered the current crisis with strong buffers, while investors largely believed Hormuz would eventually reopen.
Morgan Stanley added that rising US crude exports and weaker Chinese imports have so far helped protect the market from sharper supply shocks. However, the brokerage warned that a prolonged closure of the straits could tighten global supplies again if disruptions persisted beyond what China or the United States could comfortably absorb.
Haitong futures said markets were unsettled and warned that the truce could prove temporary. The firm added that stalled talks between Washington and Tehran pose another additional risk that oil prices could move higher.
Saudi Aramco CEO Amin Nasser warned on Monday that the disruption of shipments by Hormuz could delay the return of stability to oil markets until 2027, potentially affecting oil supplies by about 100 million barrels per week.
An extended closure of the Strait of Hormuz could disrupt global crude flows by 20 million barrels per day, Nuwama Institutional Equities said. In that case, the brokerage estimates that oil prices could rise to between $110 and $150 per barrel.
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