Iyunade Grace
Brent crude has surged past $118 per barrel, driven by escalating tensions around the Strait of Hormuz, a critical global oil chokepoint. The conflict has effectively closed the strait, disrupting oil supplies and sending prices soaring. This has created a significant gap between Brent and West Texas Intermediate (WTI), with the latter trading at around $101.50.
The surge in Brent prices reflects heightened risks to global seaborne oil supply, particularly for internationally traded crude. In contrast, WTI is largely insulated from the disruption due to its landlocked nature within the US.
The International Energy Agency (IEA) has raised alarms about significant oil supply disruptions, warning of severe impacts on European economies. Over 12 million barrels of oil have already been lost since the conflict began, with April losses expected to double March’s figures.
The US has signaled its willingness to end the war without fully reopening the Strait of Hormuz, but infrastructure damage and continued threats to energy assets keep supply risks skewed to the upside. OPEC+ supply is expected to fall sharply, by up to 11 million barrels per day in Q2 .
Global oil markets are projected to run meaningful deficits in Q2 before moving into a small surplus by year-end, assuming some degree of Hormuz normalization occurs by Q3. However, demand growth forecasts have been revised downward due to high prices and economic headwinds.
The widening Brent-WTI spread highlights how geopolitical shocks disproportionately affect internationally traded crude. While WTI remains elevated, it’s lagging behind Brent’s sharper gains.
US gas prices have crossed $4 per gallon, posing significant political risk for the Trump administration. Diesel prices have also soared, adding to inflationary pressure.
The situation remains volatile, with analysts warning of further price hikes if the Strait of Hormuz remains closed.
