Trump rejects Iran's peace proposal; concerns about the closure of the Strait of Hormuz push up oil prices.
2026-05-12 02:06:54
On Monday (May 11), WTI crude oil prices surged during the US trading session, primarily driven by Trump's rejection of Iran's peace proposal and concerns about the closure of the Strait of Hormuz. WTI crude opened with a significant bullish gap, rising to approximately $94.70 per barrel, a daily increase of 3.18%, and then continued its upward trend, climbing further to $99.03 per barrel, a gain of 3.8%. Brent crude also strengthened during the same period, rising to $104.84 per barrel, a gain of 3.5%. This series of price movements clearly reflects the market's strong sensitivity and immediate reaction to the current geopolitical situation.
The strong performance of the crude oil market is primarily a direct response to the deteriorating prospects of a swift agreement between the US and Iran, a shift that has reignited concerns about global energy supply. Investors viewed Trump's latest statements as a key signal of a stalled peace process, rapidly adjusting their expectations for supply stability, leading to a significant increase in trading volume and volatility. WTI crude oil rallied from the open and fluctuated at high levels, reflecting the battle between bulls and bears over geopolitical risk premiums. The closing price ultimately rose sharply, consolidating the strong momentum established at the beginning of the week and setting a bullish tone for subsequent trading days.
Progress of US-Iran negotiations
US President Trump called Tehran's latest response to the US peace proposal "completely unacceptable," a strong statement that directly reduced the likelihood of a lasting ceasefire and a swift reopening of the Strait of Hormuz. As a strategic passage carrying nearly 20% of the world's oil supply, the risk of the Strait of Hormuz closing became the core driver of market volatility that day, completely shattering previous market optimism about rapid progress in negotiations.
According to Iranian state media reports, Tehran's bottom line in negotiations is clear: receiving war damage compensation, lifting sanctions, and recognition of its authority over the Strait of Hormuz. Meanwhile, Iran accused the United States of attacking oil tankers over the weekend, further escalating regional tensions. Israeli Prime Minister Netanyahu stated that the conflict will not end until Iran's enriched uranium is eliminated, a demand explicitly rejected by Tehran. The opposing positions of the US, Iran, and Israel make a short-term reconciliation unlikely, and the timetable for reopening the Strait of Hormuz remains highly uncertain.
The market generally believes that the public statements from all parties indicate that a substantial diplomatic breakthrough is unlikely in the short term, the risk of supply disruptions continues to widen, and the complexity of geopolitics directly translates into an increase in risk premiums in the crude oil market. Along with the escalating tensions, shipping insurance rates in the Strait of Hormuz have surged. Before the conflict, tanker war risk rates were only 0.2%-0.25% of the hull's replacement value; currently, mainstream rates have risen to 1%-7.5%, reaching as high as 8%-10% during high-risk periods. Policy rules have also tightened, significantly increasing crude oil transportation costs and further supporting rising oil prices.
Supply risk
Several professional institutions have warned of current crude oil supply risks. Societe Generale analysts believe that even if the Strait of Hormuz reopens, it will still take several weeks for oil flows and shipping to normalize, and the tightness in the physical crude oil market will persist. Saudi Aramco CEO Amin Nasser quantified the impact of supply disruptions, stating that if the strait remains closed, the oil market will lose approximately 100 million barrels of crude oil per week, leading to a structural shortage in global oil supply in the long term, with the impact gradually reflected in inventories and spot premiums.
Tracy Shuchart, senior economist at NinjaTrader Group, points out that the current crude oil market still underestimates supply risks. In the early stages of the conflict, high levels of floating reserves, the release of strategic petroleum reserves (SPR), and a decline in Chinese imports collectively curbed oil price increases, providing a short-term buffer. However, these excess reserves are now largely depleted, and the market is approaching a critical point. Once this point is breached, the impact of supply shortages will directly translate into prices, explaining why current oil prices, despite their rise, still have room for further increases.
In summary, the impact of the Strait of Hormuz issue is cumulative and has a delayed effect; even if it reopens in the future, the market tension will be difficult to alleviate quickly. Furthermore, US shale oil production capacity is characterized by high stagnation and weak growth momentum, currently maintaining a peak daily output of 13.3 million to 13.65 million barrels. The EIA predicts that production will decline slightly in the second half of 2026. Most producers have postponed expansion due to geopolitical and debt factors, resulting in a lack of effective incremental capacity to offset the supply gap and further amplifying medium- to long-term supply risks.
Demand factors
The demand side presents a clear duality. On the one hand, the latest Chinese trade data shows improved activity in the world's second-largest economy. As a major global oil consumer, China's economic recovery has boosted expectations for stronger energy demand in the coming months, providing demand-side support for oil prices and offsetting supply-side pressures to some extent.
On the other hand, the expectation that the Federal Reserve will maintain a restrictive monetary policy is a significant constraint on rising oil prices. Recent strong US employment data has reduced expectations of rapid interest rate cuts; higher interest rates will dampen the willingness of businesses and consumers to spend, thus affecting fuel consumption growth. Furthermore, Trump's proposal to temporarily suspend the 18-cent federal gasoline tax to alleviate the pressure of high oil prices on consumers could reduce end-user fuel costs in the short term, but it cannot fundamentally solve the global supply shortage problem and can only play a supplementary balancing role.
Overall, the dynamic interaction between supply and demand has shaped the current oil price fluctuation range: stronger expectations for Chinese demand are supporting the downside of oil prices, uncertainty surrounding the Federal Reserve's policies is limiting excessive upward movement of oil prices, and the continued support from geopolitical supply risks together constitute the complex operating environment of the current crude oil market. Investors need to pay close attention to marginal changes in the geopolitical situation and macroeconomic policies.
The strong performance of the crude oil market is primarily a direct response to the deteriorating prospects of a swift agreement between the US and Iran, a shift that has reignited concerns about global energy supply. Investors viewed Trump's latest statements as a key signal of a stalled peace process, rapidly adjusting their expectations for supply stability, leading to a significant increase in trading volume and volatility. WTI crude oil rallied from the open and fluctuated at high levels, reflecting the battle between bulls and bears over geopolitical risk premiums. The closing price ultimately rose sharply, consolidating the strong momentum established at the beginning of the week and setting a bullish tone for subsequent trading days.
Progress of US-Iran negotiations
US President Trump called Tehran's latest response to the US peace proposal "completely unacceptable," a strong statement that directly reduced the likelihood of a lasting ceasefire and a swift reopening of the Strait of Hormuz. As a strategic passage carrying nearly 20% of the world's oil supply, the risk of the Strait of Hormuz closing became the core driver of market volatility that day, completely shattering previous market optimism about rapid progress in negotiations.
According to Iranian state media reports, Tehran's bottom line in negotiations is clear: receiving war damage compensation, lifting sanctions, and recognition of its authority over the Strait of Hormuz. Meanwhile, Iran accused the United States of attacking oil tankers over the weekend, further escalating regional tensions. Israeli Prime Minister Netanyahu stated that the conflict will not end until Iran's enriched uranium is eliminated, a demand explicitly rejected by Tehran. The opposing positions of the US, Iran, and Israel make a short-term reconciliation unlikely, and the timetable for reopening the Strait of Hormuz remains highly uncertain.
The market generally believes that the public statements from all parties indicate that a substantial diplomatic breakthrough is unlikely in the short term, the risk of supply disruptions continues to widen, and the complexity of geopolitics directly translates into an increase in risk premiums in the crude oil market. Along with the escalating tensions, shipping insurance rates in the Strait of Hormuz have surged. Before the conflict, tanker war risk rates were only 0.2%-0.25% of the hull's replacement value; currently, mainstream rates have risen to 1%-7.5%, reaching as high as 8%-10% during high-risk periods. Policy rules have also tightened, significantly increasing crude oil transportation costs and further supporting rising oil prices.
Supply risk
Several professional institutions have warned of current crude oil supply risks. Societe Generale analysts believe that even if the Strait of Hormuz reopens, it will still take several weeks for oil flows and shipping to normalize, and the tightness in the physical crude oil market will persist. Saudi Aramco CEO Amin Nasser quantified the impact of supply disruptions, stating that if the strait remains closed, the oil market will lose approximately 100 million barrels of crude oil per week, leading to a structural shortage in global oil supply in the long term, with the impact gradually reflected in inventories and spot premiums.
Tracy Shuchart, senior economist at NinjaTrader Group, points out that the current crude oil market still underestimates supply risks. In the early stages of the conflict, high levels of floating reserves, the release of strategic petroleum reserves (SPR), and a decline in Chinese imports collectively curbed oil price increases, providing a short-term buffer. However, these excess reserves are now largely depleted, and the market is approaching a critical point. Once this point is breached, the impact of supply shortages will directly translate into prices, explaining why current oil prices, despite their rise, still have room for further increases.
In summary, the impact of the Strait of Hormuz issue is cumulative and has a delayed effect; even if it reopens in the future, the market tension will be difficult to alleviate quickly. Furthermore, US shale oil production capacity is characterized by high stagnation and weak growth momentum, currently maintaining a peak daily output of 13.3 million to 13.65 million barrels. The EIA predicts that production will decline slightly in the second half of 2026. Most producers have postponed expansion due to geopolitical and debt factors, resulting in a lack of effective incremental capacity to offset the supply gap and further amplifying medium- to long-term supply risks.
Demand factors
The demand side presents a clear duality. On the one hand, the latest Chinese trade data shows improved activity in the world's second-largest economy. As a major global oil consumer, China's economic recovery has boosted expectations for stronger energy demand in the coming months, providing demand-side support for oil prices and offsetting supply-side pressures to some extent.
On the other hand, the expectation that the Federal Reserve will maintain a restrictive monetary policy is a significant constraint on rising oil prices. Recent strong US employment data has reduced expectations of rapid interest rate cuts; higher interest rates will dampen the willingness of businesses and consumers to spend, thus affecting fuel consumption growth. Furthermore, Trump's proposal to temporarily suspend the 18-cent federal gasoline tax to alleviate the pressure of high oil prices on consumers could reduce end-user fuel costs in the short term, but it cannot fundamentally solve the global supply shortage problem and can only play a supplementary balancing role.
Overall, the dynamic interaction between supply and demand has shaped the current oil price fluctuation range: stronger expectations for Chinese demand are supporting the downside of oil prices, uncertainty surrounding the Federal Reserve's policies is limiting excessive upward movement of oil prices, and the continued support from geopolitical supply risks together constitute the complex operating environment of the current crude oil market. Investors need to pay close attention to marginal changes in the geopolitical situation and macroeconomic policies.
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