Crude oil prices rose on Monday after falling last week. Brent moved back above $112 a barrel, while WTI climbed above $100 to about $103, with both making multi-percentage gains during the session.
Brent reached a new weekly high, while WTI stayed below its late-April peak near $107. Prices have risen about 50% since hostilities began in late February.
Escalation Risks In The Gulf
The UAE said it intercepted 12 ballistic missiles, three cruise missiles, and four drones launched from Iran. A fire at the Fujairah oil hub was linked to a drone strike.
The US expanded activity in the Strait of Hormuz through Project Freedom, involving guided-missile destroyers and more than 100 aircraft and unmanned platforms to escort neutral commercial vessels. Iran warned the US to stay out of Hormuz.
Reports said President Donald Trump rejected an Iranian proposal to reopen the strait in return for lifting a US blockade on Iranian ports. The blockade was reported to remain in place pending a broader nuclear deal.
Goldman Sachs estimated closures and attacks have removed about 14.5 million barrels per day from global supply, and the IEA called it the largest oil disruption on record. Goldman also estimated April demand may have been up to 3.6 million barrels per day below February, led by weaker jet fuel and petrochemicals.
We look back to the spring of 2025 when oil prices surged after Iran’s strike on the UAE and the subsequent US naval operations in Hormuz. That initial shock, which took Brent crude toward $120 a barrel, established a new, volatile trading range that we still live with today. Even now in May 2026, the market remains on edge, with every tanker movement in the Gulf closely watched.
Market Positioning And Demand Headwinds
The massive supply disruption from last year’s blockade has never been fully resolved, keeping global inventories tight. The US Strategic Petroleum Reserve is now sitting at its lowest level since 1983, meaning Washington has limited ability to cushion future price spikes. OPEC+ has also been cautious, maintaining production discipline to support prices around the current $98 a barrel level for Brent.
For derivative traders, this means implied volatility is likely to remain elevated, making option strategies like straddles potentially attractive to play sharp price swings. The Brent-WTI spread, which widened dramatically during the initial 2025 supply shock, continues to be a key trade as any fresh Middle East tension will hit seaborne crude pricing hardest. We should anticipate this spread to widen further on any news of renewed escalation in the Strait.
However, we must watch the demand side of the equation, which is showing signs of weakness after a year of high energy costs. Recent inflation data from the IMF shows global headline inflation remains stubbornly above 4%, largely driven by energy, which is beginning to slow economic activity. Any sign of a coordinated global slowdown could put a ceiling on prices, creating a risk for overly bullish positions.
