Oil prices pulled back after a sharp rally, as uncertainty over Iran's participation in potential talks with the US tempered bullish momentum driven by supply fears. The market remains highly reactive to geopolitical headlines, oscillating between escalation risks and fragile diplomatic signals.
Crude benchmarks surged after tensions flared in the Gulf over the weekend. Brent crude for June settlement rose 6.1% to $95.89 a barrel, while WTI for May delivery jumped 7.5% to $90.12 a barrel, as traders priced in the risk of supply disruptions.
The rally followed the US Navy's seizure of an Iranian-linked vessel in the Gulf of Oman after it allegedly ignored warnings. The incident came alongside reports of Iranian fire toward ships and renewed restrictions in the Strait of Hormuz.
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The Strait of Hormuz — a critical conduit for roughly a fifth of global oil and LNG trade — remains at the heart of the conflict. Shipping activity has been severely disrupted, with several tankers turning back and transit appearing limited. Iran briefly reopened the waterway before reimposing controls, citing violations of a ceasefire framework. The stop-start nature of access has amplified concerns over a prolonged supply squeeze.
Diplomatic developments have added to volatility. The US has indicated that senior officials may travel to Islamabad for negotiations, but Iranian representatives have cast doubt on any confirmed participation.
This divergence has left markets pricing in a partial geopolitical risk premium. Analysts say prices could trend higher if disruptions persist, though direction remains heavily dependent on fast-changing headlines.
Beyond immediate price swings, the war is beginning to ripple through the global economy. Elevated crude prices near the mid-$90 mark for Brent are reviving concerns around inflation and growth.
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