Oil prices have experienced a significant rally driven by escalating tensions between Iran and the United States, as well as notable shifts in Chinese oil demand and supply management. According to Commerzbank analysts, Brent crude surged by $7 since the previous day, reaching $107 per barrel, in response to heightened Iran–US tensions and ongoing US policy debates over gasoline tax relief. The US government's consideration of suspending the gasoline tax is seen as an indication of skepticism regarding a swift resolution to the conflict [1].
In parallel, West Texas Intermediate (WTI) crude oil climbed more than 3% on Tuesday, trading around $98.38 per barrel, as concerns over supply disruptions through the Strait of Hormuz persist due to the deadlocked US-Iran negotiations. The US Energy Information Administration (EIA) forecasts that global oil trade and output may not return to pre-war levels until late 2026 or early 2027, assuming the Strait of Hormuz remains closed through late May and gradually reopens in June. The EIA also warned that if the strait remains shut through late June, crude oil prices could rise by another $20 per barrel above current forecasts [2].
On the supply side, China’s crude oil imports fell sharply in April, with further declines expected as shipments from Saudi Arabia and Iran decrease. Shipments in May reportedly halved compared to April, dropping to 20 million tons, with a further decline to 13–14 million tons anticipated for June. China has drawn on its crude oil reserves for the first time in years, maintained refinery quotas for 2025, and imposed an export ban on diesel and gasoline, resulting in a one-third drop in oil product exports in April to 3.12 million tons—the lowest monthly level in over nine years. Commercial diesel stocks in China are at their highest since the summer of 2024 [1].
Geopolitical risks remain elevated as Iran has expanded its definition of the Strait of Hormuz to a width of 200–300 miles, up from the previous 20–30 miles, intensifying fears of prolonged supply disruptions. The strait is a critical chokepoint, handling about 20% of global oil shipments. WTI has risen more than 40% since the start of the Middle East war, reflecting the persistent geopolitical risk premium in oil markets. Technical analysis indicates that WTI maintains a bullish bias above key moving averages, with immediate support at $93 and further demand zones at $85, $77.37, and $69.14. The relative strength index (RSI) at 54 suggests moderate upside momentum, while volatility remains elevated [2].
Additionally, a Reuters survey found that OPEC oil output in April fell to its lowest level in more than two decades, further tightening the global supply outlook [2].
CONCLUSION
Oil markets are experiencing heightened volatility and a strong risk premium due to escalating Iran-US tensions, supply disruptions through the Strait of Hormuz, and significant shifts in Chinese demand and export policy. Both Brent and WTI prices have surged, with analysts and agencies warning of further upside risk if geopolitical tensions persist. The market outlook remains bullish but highly sensitive to ongoing developments in the Middle East and Chinese import trends.