The International Energy Agency said the oil market is set to return to a surplus this quarter for the first time since the United States Iran war began, a shift that could cap prices even while the Strait of Hormuz stays dangerous. WTI crude reversed earlier gains and fell 0.4 percent on Friday after the agency report, while Brent crude settled 3.3 percent higher at 95.82 dollars a day earlier.
Why it matters
The surplus matters because the strait is still the centre of the crisis. Iran said an LNG tanker hit a mine, and its Revolutionary Guards said they targeted a United States radar in Bahrain. The Revolutionary Guards had already said two oil tankers were disabled by explosions in the strait, and shipping through the chokepoint has nearly stopped as operators and insurers pull back.
Buyers are already adjusting to a longer crisis. India has demanded unimpeded shipping through the strait, and buyers are looking for alternatives, with African liquefied natural gas exports projected to soar as buyers flee Hormuz. The shift shows how quickly a security crisis in one waterway can redraw energy trade routes.
What happens next
The diplomacy has not stopped the attacks. The Abu Dhabi talks produced a prisoner exchange but no ceasefire, and President Trump said the United States does not need a deal with Iran. The envoys have since moved on to Moscow, but the strait, not the diplomacy, is setting the price of crude.
For now, the market is caught between fear and supply. If the surplus arrives as the agency expects, oil has a ceiling even with Hormuz in crisis. If the attacks widen, the fear premium will win, and the next incident in the strait will decide which force is stronger.
The diplomacy has not stopped the attacks. The Abu Dhabi talks produced a prisoner exchange but no ceasefire, and President Trump said the United States does not need a deal with Iran. The envoys have since moved on to Moscow, but the strait, not the diplomacy, is setting the price of crude.
