Oil falls after three-day rally as Iran truce remains fragile

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Oil falls after three-day rally

Highlights

Oil prices fell 1.4–1.5%: WTI at $100.68, Brent at $106.27 per barrel.
The Iran ceasefire remains shaky, with the Strait of Hormuz still largely closed.
Trump heads to Beijing for talks with Xi amid ongoing energy market volatility.
U.S. inflation accelerated to 3.8% in April, with crude stockpiles shrinking.

Current trading and recent moves

As of early Asian trading on May 13, West Texas Intermediate crude was at $100.68 per barrel, down $1.50, or 1.47%. Brent crude fell $1.50, or 1.39%, to $106.27 per barrel. The pullback came after a strong gain of more than 3% on Tuesday, driven by fading hopes for a durable truce and Iran’s tightened control over the Strait of Hormuz.

Since late February, following U.S. and Israeli strikes on Iran and Tehran’s effective closure of the strait—through which roughly one-fifth of global oil and LNG trade normally flows—both benchmarks have largely traded above $100 per barrel. Cumulative supply disruptions have now exceeded 1 billion barrels, Reuters reported.

Geopolitics, diplomacy, and economic impact

President Trump said Tuesday he does not believe he will need China’s help to end the conflict with Iran, even as hopes for a lasting peace agreement diminish. China remains the largest buyer of Iranian oil despite U.S. pressure. Trump is scheduled to meet Xi in Beijing on Thursday and Friday.

Analysts at Eurasia Group noted that the scale of disruptions means oil prices are likely to stay above $80 per barrel through the end of the year. The war is already feeding into the U.S. economy: April’s consumer price index rose 3.8% year-over-year — the highest annual inflation reading in nearly three years — largely due to higher gasoline prices.

Economists at Capital Economics warned that while higher inflation has not yet sharply curbed consumer spending, declining sentiment and hiring intentions point to potential weakening demand. Elevated interest rates are making borrowing more expensive, which could further dampen oil consumption. U.S. crude inventories have declined for the fourth straight week, according to American Petroleum Institute data.

Geopolitical risks keep oil elevated despite pullback

Wednesday’s price action highlights how sensitive energy markets remain to developments in the Middle East. Although prices retreated modestly, they continue to trade at elevated levels due to real supply losses exceeding 1 billion barrels. Trump’s upcoming summit with Xi could prove pivotal, given China’s central role in the Iranian oil trade.

For the global economy, sustained high-energy prices mean continued inflationary pressure and risks to growth—particularly in the United States, where rising fuel costs are already affecting consumers and complicating Federal Reserve policy. Markets will now look for clarity from the Beijing meetings and upcoming official U.S. inventory data.

It was earlier reported that oil prices added a war premium after Trump's statement.

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