The Commodities Feed: Oil Rallies With US-Iran Deadlock

The oil market continues to reprice ongoing supply disruptions, with last week's Trump-Xi talks yielding no tangible progress in the Middle East. There had been hope (possibly misplaced) that China could use its influence over Tehran to break the deadlock between the US and Iran. If anything, re-escalation risks are increasing, with a drone strike on the UAE's only nuclear power plant over the weekend. President Trump warned Iran that the“clock is ticking” and that“they better get moving, fast, or there won't be anything left of them." It's no surprise that Brent is trading stronger this morning after the aggressive rhetoric, moving convincingly above $110/bbl.

Over the last week, there have been more vessels passing through the Strait of Hormuz. There were reports that Iran allowed 30 vessels to navigate the strait over a 2-day period last week. Also, several crude tankers have managed to get through. A Vietnamese-bound tanker carrying Iraqi crude, previously blocked by the US, received clearance to continue its journey. So while the standoff between the US and Iran continues, there are signs of a pick-up in shipping activity. However, this can change quickly.

Meanwhile, Iraq's oil ministry said that despite the disruptions in flows through the Strait of Hormuz, the country still managed to export 10m barrels of oil in April. This amounts to a little over 300k b/d. It shows that we are still seeing oil getting through, though at far-below-normal levels. Prior to the war, Iraq was exporting roughly 93m barrels a month through the Strait of Hormuz.

The ongoing supply disruptions mean the market has had to rely largely on inventory and alternative supply, where possible. This has included Russian oil, following the US's issuance of a waiver for Russian oil sales. It allowed a large amount of Russian oil floating at sea to be sold. This floating storage has grown since last year due to US sanctions. However, this waiver expired over the weekend, and the US has not extended it so far, despite the significant tightness in the oil market.

The latest positioning data shows that speculators reduced their net long in ICE Brent by 28,400 lots over the last reporting week to 345,805 lots as of last Tuesday. This move was driven predominantly by longs liquidating. Speculators likely took some risk off the table ahead of the Trump-Xi meeting, in case there were any Iran-related breakthroughs. However, the move in the market suggests that speculators have likely increased their long position more recently.

The latest data from Baker Hughes indicates that US producers may finally be responding to the higher price environment. The number of active oil rigs increased by 5 over the last week to 415, the highest count since November 2025. The cumulative increase in rigs over the last 3 weeks totals 8. Meanwhile, Primary Vision's frac spread count also shows a pickup in completion activity. Its count has increased to 184- up 5 WoW and the highest since June last year.

The European gas market is seeing renewed strength with little sign of a resolution in the Middle East. TTF broke above EUR50/MWh and this strength is continuing in early-morning trading today. We have highlighted several times that the gas market is underpricing the scale of the supply impact from the Persian Gulf. Asian buyers will need to enter the spot market to replace disrupted contracted cargoes from the Persian Gulf, increasing competition between Asian and European buyers. Storage in the EU remains relatively tight at 36% full compared to a 5-year average of 50% full.

MENAFN17052026000222011065ID1111128946