Global oil prices climbed on the first day of May on Friday amid a continuing deadlock in efforts to resolve the Iran conflict, as Tehran maintained its blockade of the Strait of Hormuz while the US Navy simultaneously halted exports of Iranian crude.
The Brent crude oil contract was last at $111.01 per barrel, up 0.6%, while the West Texas Intermediate crude was at $105.20 per barrel, up 0.1% from the previous close.
Both benchmarks have recorded four consecutive months of gains. Brent’s June contract, which expired on Thursday, reached $126.41 a barrel, the highest level since March 2022.
Oil price surge driven by conflict and blockade
Since the end of February, oil prices have surged, driven by the attack on Iran by the US and Israel.
The conflict led to the closure of the Strait of Hormuz, which disrupted the global supply of crude oil and liquefied natural gas (LNG)—roughly one-fifth of the world’s total.
As a result of this disruption, Brent crude oil prices jumped by 50% in March alone.
Iran controls the Strait of Hormuz, which severely limits most shipping traffic.
Compounding this, the continuing US blockade of Iranian ports throughout the region is also having a detrimental effect.
Despite a ceasefire in effect since April 8, Iranian Foreign Ministry spokesman Esmaeil Baghaei stated on Thursday evening that expecting rapid outcomes from US talks was “not reasonable,” according to the official IRNA news agency.
“Expecting to reach a result in a short time, regardless of who the mediator is, in my opinion, is not very realistic,” he was quoted as saying.
Oil prices had initially surged to intraday highs on Thursday following a threat from a senior official of Iran’s Revolutionary Guards, who warned of “long and painful strikes” on US positions should Washington resume attacks on Iran.
However, prices later retreated from these peaks.
This approach seems to be working, yet there is also a noticeable escalation in the US President Donald Trump administration’s efforts to force a resolution.
Market expectations and the UAE’s OPEC exit
“Despite this, both WTI and Brent continue to show a steep backwardation across the forwards going into year-end. This indicates that oil traders expect prices to fall once hostilities conclude,” said David Morrison, senior market analyst at Trade Nation.
The backwardation intensified on Wednesday, following the UAE’s announcement that it will be withdrawing from OPEC on May 1 after six decades of membership.
The current sharp rise in the futures market is driven by two main factors: the anticipation of a worsening conflict involving Iran and the persistent stress in the physical market, according to Commerzbank AG.
The latter has been evident for some time, with oil prices already elevated and supplies from the Middle East significantly constrained for over two months.
“How sustainable this price spike is depends crucially on the nature of a potential US strike: While a limited tactical attack could trigger only a short-term price increase, a multi-stage escalation threatens to cause a prolonged structural supply disruption,” Norman Liebke, FX and commodity analyst at Commerzbank, said in a report.
As a result of the UAE’s action, the country is now free to expand crude oil production, which could help mitigate some of the economic damage the nation has suffered since the Iran war began in late February.
“The UAE’s exit does not materially alter near-term supply availability, but it reflects a longer-term strategic shift toward greater production flexibility as the country seeks to monetize its expanding capacity base,” Priya Walia, vice president of commodity markets at Rystad Energy, said in a commentary on Thursday.
However, experts believe that the UAE will not be able to expand its crude oil supply as long as the Strait of Hormuz remains closed.
This does not mean the UAE will immediately ramp volumes, as current operational and logistical constraints tied to the regional conflict prevent any near-term surge, but it does mean that as conditions normalize, those barrels will return on commercial terms rather than managed ones.