WTI crude oil prices rebounded sharply toward the end of May and are once again trading near the $99 per barrel level amid escalating tensions surrounding Iran and ongoing risks to supplies through the Strait of Hormuz. The market has effectively returned to a geopolitical risk premium environment, with investors pricing in the possibility of new supply disruptions and further reductions in exports from the Middle East region.
Recent reports highlighting difficulties in negotiations between the United States and Iran have increased market concerns and triggered another upward impulse in oil prices.
Supply risks outweigh demand concerns
Despite ongoing signs of a slowdown in the global economy, the oil market is currently reacting primarily to supply threats. According to IEA estimates, restrictions affecting shipments through the Strait of Hormuz have already caused the largest energy shock in decades. At the same time, OPEC+ continues to maintain a cautious stance and has not yet shown readiness for a significant increase in production, limiting itself to targeted adjustments. This continues to support prices despite weak expectations for global demand and slowing industrial activity in Europe and China.
The U.S. and the dollar continue to influence market dynamics
Another major source of volatility remains Federal Reserve policy and the performance of the US dollar. Stronger-than-expected inflation data in the United States reduced expectations of rapid interest rate cuts, temporarily supporting the dollar and limiting further oil gains. However, the market remains highly sensitive to US crude inventory statistics and comments from American regulators. Any signs of declining commercial inventories or logistical disruptions could quickly accelerate another move higher in prices.
Near-term outlook: market remains in a phase of elevated turbulence
WTI continues to trade in highly nervous conditions, with immediate support now shifting toward the $96 per barrel area, while resistance is located around $100–102.5 — a level that could be broken in the event of a collapse in US-Iran negotiations.
As long as geopolitical tensions remain elevated, the risks of another rally in oil prices stay high. In the event of further escalation around the Strait of Hormuz, the market could quickly move toward a scenario above $110 per barrel, while de-escalation could return prices below the $90 range, as was also discussed in the article U.S. crude holds below $100 as hopes for a U.S.-Iran deal grow.
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