Oil Rises Again, Gulf Energy Risks Grow, Rally Stalled by Trump
Oil prices rose for a second straight day after the US and Israel escalated attacks on Iran, while the impact of the escalating conflict is increasingly felt on energy assets in the Persian Gulf region. WTI closed above $74.50 per barrel—recording its biggest two-day gain in four years—while Brent closed above $81.
The aggressive two-day rally briefly subsided after President Donald Trump said the US would escort tankers through the Strait of Hormuz and provide insurance for shipments. This statement curbed the rally, which had been fueled by fears of a worst-case scenario: a prolonged disruption in Hormuz, a narrow waterway that carries about a fifth of global crude oil supplies.
Trump also called oil prices “a little too high” and predicted a decline once the conflict ends. Markets are anticipating potential action by Washington to contain gasoline and energy prices—politically sensitive issues—but inflation risks remain as expensive energy weighs on growth prospects and makes it difficult for central banks to control inflation.
On the supply side, Iraq has reportedly cut production at its giant Rumaila field and could shut down around 3 million barrels per day if the crisis continues. Several Iraqi storage tanks are also reportedly filling up due to shipping disruptions stemming from the situation in Hormuz. Saudi Arabia is exploring the option of transporting more barrels via the Red Sea, but this route is not risk-free due to the threat of Houthi attacks in the waters.
These tensions caused Brent to surge around 11% in just two days, at one point reaching $85/barrel (the highest level since July 2024). However, the rally was somewhat tempered after an International Energy Agency (IEA) document indicated the agency's readiness to help stabilize the global oil market if needed.
The conflict has also begun to affect infrastructure: Saudi Aramco halted operations at its Ras Tanura refinery after a drone attack, while intercepted drone debris sparked a massive fire in the oil trading hub of Fujairah (UAE). The US Embassy in Saudi Arabia also issued a warning about potential missile/UAV attacks in several regions, adding to pressure on sentiment and risk premiums.
The knock-on effect is evident in gas: the Hormuz route is also vital for LNG tankers. Qatar reportedly halted production at the world's largest LNG export facility after being targeted. On the demand side, China urged all parties to ensure shipping safety in Hormuz, while Indonesia stated it would divert some crude imports from the US as an alternative to Middle Eastern shipments.
Market indicators show increasing short-term tightness. The Brent prompt spread (the difference between the two nearest contracts) widened to around $2.80/barrel in backwardation—a bullish pattern—from just $0.19 a week earlier. Shipping costs also surged: the cost of bringing crude from the Middle East to China hit a record, with the daily rate on the benchmark route reaching around $481,000/day.
Closing prices:
April WTI rose 4.7% to $74.56/barrel.
May Brent rose 4.7% to $81.40/barrel.
Source: Newsmaker.id
