Oil markets surged on Tuesday, pushing U.S. crude past the $100-per-barrel mark, as collapsing peace talks over the U.S.-Israeli war on Iran rekindled fears of a global energy supply crisis.
Brent crude futures climbed $2, or 1.9%, to $106.21 per barrel by early morning trading, while U.S. West Texas Intermediate (WTI) pushed past the triple-digit mark, gaining $2.31, or 2.4%, to settle at $100.38.
The gains extended a near 2.8% rally recorded across both benchmarks on Monday, painting a picture of a market increasingly nervous about what lies ahead.
The catalyst for Tuesday’s spike came from an unusually candid admission by President Donald Trump, who on Monday described the ceasefire negotiations with Iran as being “on life support.”
The White House confirmed that talks have stalled over a cluster of deeply contentious issues, among them the cessation of hostilities on all active fronts, the lifting of a U.S. naval blockade of Iranian waters, the reinstatement of Iranian oil exports to global markets, and the thorny question of war damage compensation, a demand Tehran has reportedly pushed with considerable force.
For its part, Iran has refused to yield on what it considers a non-negotiable point of national pride: sovereignty over the Strait of Hormuz, the narrow but strategically vital waterway through which approximately one-fifth of the world’s oil and liquefied natural gas flows each day.
Any suggestion that Washington might seek to contest that claim has been met with fierce resistance from Iranian officials, further poisoning an already fragile diplomatic atmosphere.
The near-closure of the Strait of Hormuz has already left deep marks on global energy supply chains. Producers across the region have been forced to curtail exports in response to the disruptions, and the consequences are now showing up starkly in the data.
Saudi Aramco chief executive Amin Nasser, speaking Monday, issued one of the starkest warnings yet from within the industry. He cautioned that unless shipping disruptions through the strait are resolved swiftly, a return to market stability may not materialize until 2027, a timeline that would represent years of elevated prices and constrained supply for an already strained global economy.
Nasser put a number to the damage: roughly 100 million barrels of oil per week are currently being lost to the disruptions, a figure that, if sustained, would represent one of the most significant supply shocks in the post-war era of energy markets.
Market analysts are now openly mapping out the divergent price scenarios that hinge on the trajectory of diplomacy in the coming weeks.
Suvro Sarkar, energy sector team lead at DBS Bank, put it bluntly: “Optimism regarding an imminent deal seems to be fading again, and if we don’t see a deal by the end of May, then upside risks for oil prices are definitely on the table.”
His comments reflect a growing consensus that the window for a diplomatic resolution is narrowing and that markets may soon be forced to price in a more prolonged conflict scenario.
Tim Waterer, chief market analyst at KCM Trade, framed the stakes in even sharper relief. “A genuine breakthrough toward a peace deal could trigger a sharp $8–$12 correction,”* he said, “while any escalation or renewed blockade threats would quickly push Brent back toward $115 and beyond.”
In other words, the difference between a diplomatic breakthrough and a breakdown could be worth more than $20 per barrel to traders, a spread that encapsulates the extraordinary uncertainty gripping global energy markets right now.
Beyond the geopolitical drama, domestic U.S. supply data offered additional support for higher prices. Analysts polled by Reuters forecast a draw of approximately 1.7 million barrels from U.S. crude stockpiles in the previous week, a decline attributed in part to strong export flows.
Walt Chancellor, an energy strategist at Macquarie Group, noted that the drawdown comes against “a backdrop of continued strong net waterborne export flows for crude and products across the next several weeks,” suggesting that stateside supply pressure is unlikely to ease in the near term.
Adding yet another layer of complexity to an already fraught week, market participants are closely watching for signals ahead of President Trump’s scheduled summit with Chinese President Xi Jinping on Thursday and Friday.
The meeting carries significant implications for global energy trade, particularly after Washington moved to impose fresh sanctions on three individuals and nine companies accused of facilitating Iranian oil shipments to China, a practice that has served as a critical lifeline for Tehran throughout the conflict.
The U.S.-China trade war has already dramatically upended bilateral energy commerce. Chinese imports of American oil and LNG, worth a substantial $8.4 billion in 2024, have ground to a near-halt under the weight of tariffs that took hold during Trump’s second term.
Whether this week’s summit produces any thaw or deepens the freeze could have significant ripple effects on energy flows, pricing dynamics, and the broader geopolitical contest over Iranian oil.
With peace talks faltering, a critical waterway under threat, OPEC output at multi-decade lows, and a pivotal diplomatic summit on the horizon, the oil market finds itself at one of its most consequential crossroads in years.
The next two weeks may well determine whether crude prices spike toward new highs or retreat sharply on the back of a hard-won deal. For now, traders appear to be betting that resolution remains elusive.
WHAT YOU SHOULD KNOW
Oil prices are surging past $100 a barrel and could climb significantly higher, with one key reason: the war between the U.S., Israel, and Iran is showing no signs of ending soon.
Peace talks are collapsing, the critical Strait of Hormuz, a chokepoint for 20% of the world’s oil and gas, remains under threat, and OPEC output has hit its lowest level in over two decades.
Until a credible ceasefire deal is reached, expect energy markets to remain volatile and prices to stay painfully elevated, with analysts warning Brent crude could push toward $115 if the situation deteriorates further.
