The continued lockdown in Hormuz has dampened supply expectations, causing WTI to return above $95.
2026-05-08 02:36:11
On Thursday (May 7), during the US trading session, international crude oil futures experienced significant intraday volatility, ultimately recovering substantial losses despite the Strait of Hormuz blockade lasting longer than market expectations. The WTI crude oil futures contract briefly fell below $90, hitting a low of around $89, before rebounding strongly by over $6 to recover above $95. Brent crude oil also initially fell to around $95 before quickly rising in the afternoon and returning above the $100 mark.
The market was initially pressured in early trading by news that Iran was about to respond to the latest 14-point ceasefire proposal from the US through Pakistani mediators, but geopolitical risk premiums rebounded rapidly in the afternoon as a reassessment of actual diplomatic progress was made. Traders said that despite the hope for negotiations, the actual impact of the blockade on global oil transportation has not eased, causing oil prices to fluctuate significantly between "hope and reality."
Iran responded through Pakistan; core disagreements remain regarding the US 14-point proposal.
According to multiple sources, Iran's response to the 14-point draft agreement proposed by the United States is being conveyed through Pakistani mediators. The draft aims to end the state of war between the two sides and provides a 30-day window for negotiations on issues such as nuclear enrichment, the unfreezing of frozen assets, and safe passage through the Strait of Hormuz.
Iran has emphasized that any substantial progress is contingent on the immediate lifting of the US maritime blockade and recognition of Iran's "new rules of passage" in the Strait of Hormuz. The Islamic Revolutionary Guard Corps has consistently stated publicly that only vessels adhering to Iranian-established rules can pass safely.
US President Trump said Wednesday evening that the talks were "going well," but warned that the US would take "stronger and more intense measures" if Iran did not cooperate. Currently, significant differences remain between the two sides on issues such as the ceasefire deadline (Iran wants a comprehensive and rapid end to the war, not just a temporary ceasefire), the withdrawal of US troops, and sovereignty over the Strait of Hormuz. Analysts point out that the unsigned agreement is unlikely to immediately change the tense situation on the ground.
Actual transportation is constrained, and the spot market remains tight.
Although Maersk confirmed that a US-flagged oil tanker successfully passed through the Strait of Hormuz under US naval escort, Operation Freedom of the Sea has been temporarily suspended at the request of Pakistan and Saudi Arabia. The US blockade of ships bound for Iran remains in effect, and many oil tankers in the region have opted to sail discreetly with their AIS signals off, significantly reducing transport efficiency.
There were no clear signs of easing in the spot market. Spot premiums for some crude oils in Europe and Asia remained high, with non-Middle Eastern crude oils (such as Norwegian Sverdrup) once approaching $150 per barrel, significantly higher than futures prices, reflecting stronger concerns in the physical market about supply disruptions in the Middle East.
The disruption to Qatari liquefied natural gas shipments and damage to regional energy infrastructure have yet to ease. Meanwhile, U.S. domestic gasoline prices are currently around $4.54 per gallon, the highest level since July 2022, further exacerbating market concerns about supply pressures during the summer travel season.
Oil prices are in a fragile balance
Market commentators such as FXStreet pointed out that the main driver of the early morning decline in oil prices was optimism surrounding the negotiations, but the market quickly returned to reality in the afternoon—the longer the lockdown lasts, the greater the pressure on the global crude oil supply chain. Currently, WTI and Brent prices are teetering on a delicate balance between a rebound driven by diplomatic hopes and actual supply risks.
Analysts from several investment banks stated in their latest reports that if the diplomatic deadlock fails to achieve a breakthrough by the end of this week, oil prices may continue to rise. Conversely, if the two sides reach a preliminary framework agreement, oil prices may experience a rapid correction of $5-8.
Looking ahead
In the short term, market focus will be on the follow-up developments of the Pakistani mediation, whether the US will restart large-scale escort operations, and whether Iran will release further signals. With the peak summer demand season approaching in the Northern Hemisphere, any prolonged supply disruptions will provide stronger support for oil prices.
At 02:31 Beijing time, WTI crude oil was trading at $95.04 per barrel, down 0.04%, and Brent crude oil was trading at $100.17 per barrel, down 1.75%, both showing a significant rebound from their intraday lows. Investors should continue to monitor the impact of geopolitical news flow on volatility.
The market was initially pressured in early trading by news that Iran was about to respond to the latest 14-point ceasefire proposal from the US through Pakistani mediators, but geopolitical risk premiums rebounded rapidly in the afternoon as a reassessment of actual diplomatic progress was made. Traders said that despite the hope for negotiations, the actual impact of the blockade on global oil transportation has not eased, causing oil prices to fluctuate significantly between "hope and reality."
Iran responded through Pakistan; core disagreements remain regarding the US 14-point proposal.
According to multiple sources, Iran's response to the 14-point draft agreement proposed by the United States is being conveyed through Pakistani mediators. The draft aims to end the state of war between the two sides and provides a 30-day window for negotiations on issues such as nuclear enrichment, the unfreezing of frozen assets, and safe passage through the Strait of Hormuz.
Iran has emphasized that any substantial progress is contingent on the immediate lifting of the US maritime blockade and recognition of Iran's "new rules of passage" in the Strait of Hormuz. The Islamic Revolutionary Guard Corps has consistently stated publicly that only vessels adhering to Iranian-established rules can pass safely.
US President Trump said Wednesday evening that the talks were "going well," but warned that the US would take "stronger and more intense measures" if Iran did not cooperate. Currently, significant differences remain between the two sides on issues such as the ceasefire deadline (Iran wants a comprehensive and rapid end to the war, not just a temporary ceasefire), the withdrawal of US troops, and sovereignty over the Strait of Hormuz. Analysts point out that the unsigned agreement is unlikely to immediately change the tense situation on the ground.
Actual transportation is constrained, and the spot market remains tight.
Although Maersk confirmed that a US-flagged oil tanker successfully passed through the Strait of Hormuz under US naval escort, Operation Freedom of the Sea has been temporarily suspended at the request of Pakistan and Saudi Arabia. The US blockade of ships bound for Iran remains in effect, and many oil tankers in the region have opted to sail discreetly with their AIS signals off, significantly reducing transport efficiency.
There were no clear signs of easing in the spot market. Spot premiums for some crude oils in Europe and Asia remained high, with non-Middle Eastern crude oils (such as Norwegian Sverdrup) once approaching $150 per barrel, significantly higher than futures prices, reflecting stronger concerns in the physical market about supply disruptions in the Middle East.
The disruption to Qatari liquefied natural gas shipments and damage to regional energy infrastructure have yet to ease. Meanwhile, U.S. domestic gasoline prices are currently around $4.54 per gallon, the highest level since July 2022, further exacerbating market concerns about supply pressures during the summer travel season.
Oil prices are in a fragile balance
Market commentators such as FXStreet pointed out that the main driver of the early morning decline in oil prices was optimism surrounding the negotiations, but the market quickly returned to reality in the afternoon—the longer the lockdown lasts, the greater the pressure on the global crude oil supply chain. Currently, WTI and Brent prices are teetering on a delicate balance between a rebound driven by diplomatic hopes and actual supply risks.
Analysts from several investment banks stated in their latest reports that if the diplomatic deadlock fails to achieve a breakthrough by the end of this week, oil prices may continue to rise. Conversely, if the two sides reach a preliminary framework agreement, oil prices may experience a rapid correction of $5-8.
Looking ahead
In the short term, market focus will be on the follow-up developments of the Pakistani mediation, whether the US will restart large-scale escort operations, and whether Iran will release further signals. With the peak summer demand season approaching in the Northern Hemisphere, any prolonged supply disruptions will provide stronger support for oil prices.
At 02:31 Beijing time, WTI crude oil was trading at $95.04 per barrel, down 0.04%, and Brent crude oil was trading at $100.17 per barrel, down 1.75%, both showing a significant rebound from their intraday lows. Investors should continue to monitor the impact of geopolitical news flow on volatility.
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