Oil prices climbed Friday. Brent crude futures rose to $104.24 a barrel. WTI gained to $97.46. Yet both benchmarks headed for weekly losses of 4.6% and 7.6% respectively. Investors weighed thin prospects for a quick end to the Iran conflict against persistent supply shortfalls.
The immediate catalyst came from skepticism over U.S.-Iran peace talks. A senior Iranian source told Reuters gaps had narrowed. U.S. Secretary of State Marco Rubio noted “some good signs.” But the two sides remained divided on Tehran’s uranium stockpile and control of the Strait of Hormuz. No breakthrough appeared imminent. Markets priced in continued disruption.
Six weeks after a fragile ceasefire, progress has stalled. Elevated prices now ripple through global economies. They stoke inflation fears. They cloud growth outlooks. And they leave traders scanning every headline for clues on when normal flows might resume.
Around 20% of global energy supplies once moved through the Strait before the war. That route’s effective closure has pulled 14 million barrels per day — roughly 14% of world supply — from the market. Saudi Arabia, Iraq, the United Arab Emirates and Kuwait all felt the impact. Full restoration won’t happen before the first or second quarter of 2027. Even if fighting stops tomorrow. The head of ADNOC delivered that sober assessment.
OPEC responded with its own revisions. The group cut its forecast for 2026 global oil demand growth to 1.17 million barrels per day. That marked a reduction from the previous 1.38 million barrels per day projection. The Iran war and Hormuz closure drove the change. For the second quarter alone, OPEC trimmed another 500,000 barrels per day from expected demand. World oil demand is now seen averaging 104.57 million barrels per day in Q2. Reuters reported the details.
Meanwhile OPEC+ production fell sharply in April. Output averaged 33.19 million barrels per day. That reflected a 1.74 million barrel-per-day drop from March levels. The alliance had planned output increases. The closure made them impossible to deliver. Separate data from the International Energy Agency showed even steeper supply losses. Global oil supply declined by a further 1.8 million barrels per day in April to 95.1 million barrels per day. Cumulative losses since February reached 12.8 million barrels per day. The IEA laid out the numbers in its May Oil Market Report.
Geopolitical Risk Premium Meets Demand Destruction
Prices remain elevated despite these revisions. Brent traded above $100 in recent sessions before Friday’s modest pullback in weekly terms. The U.S. Energy Information Administration now expects Brent to average $106 per barrel in May and June amid massive inventory draws of 8.5 million barrels per day in the second quarter. Later in the year, as Middle East production recovers, prices could fall toward $89 in the fourth quarter. The outlook for 2027 sits at $79. Yet many analysts question whether the relief will arrive on schedule.
“Oil prices would only trend lower when oil market fundamentals materially improve, which looks destined to stretch into 2027,” said David Oxley, chief commodities economist at Capital Economics. His view aligns with the latest forecasts. BMI, a unit of Fitch Solutions, lifted its average 2026 dated Brent price forecast to $90 from $81.50. The revision accounts for the supply deficit, damaged infrastructure and a six-to-eight week normalization period after any conflict resolution. Yahoo Finance carried the original Reuters dispatch.
Traders aren’t convinced OPEC+ will tighten further. The group is expected to approve a modest increase in its July output target when key members meet June 7. Four sources told Reuters the step is likely. Deliveries for several producers remain hampered by the war. Earlier decisions to pause additional output hikes into the first quarter of 2026 already signaled caution. The alliance has extended voluntary cuts multiple times in recent years to counter surpluses and non-OPEC growth. This time the calculus includes war-related losses that removed millions of barrels overnight.
But. The demand side tells a different story. Higher prices encourage conservation. Petrochemical feedstocks grow scarce. Aviation activity runs below normal. Jet fuel prices nearly tripled at points after Middle East exports halted. End users cut back. The IEA now forecasts a outright contraction in global oil demand of 420,000 barrels per day for 2026. That is 1.3 million barrels per day weaker than its pre-conflict projection. Second-quarter demand alone could drop 2.4 million barrels per day year-over-year.
Refiners feel the squeeze too. Crude throughputs are projected to plunge 4.5 million barrels per day in the second quarter. Annual declines of 1.6 million barrels per day look likely. Margins have suffered. Infrastructure damage and export restrictions compound the pressure.
So the market sits in limbo. Supply shocks from the conflict prop up near-term prices. Longer-term forecasts point to eventual relief and potential surpluses once flows resume. Yet repair timelines stretch into 2027. Non-OPEC production growth continues. Economic resilience persists even as consumers absorb higher fuel costs. Satoru Yoshida, commodity analyst at Rakuten Securities, expects WTI to trade in a $90 to $110 range next week. That band has held since late March. It captures the tension between geopolitical risk and weakening fundamentals.
Recent analysis reinforces the uncertainty. Barclays and HSBC both raised their 2026 Brent targets in response to the disruptions. The EIA highlights widening Brent-WTI spreads caused by shipping issues and high U.S. inventories. On social media and trading desks, participants debate whether reopening the Strait will truly crash prices back to pre-war levels. Continental Resources Chairman Harold Hamm expressed doubt. He told the Bismarck Tribune he does not expect a return to prior “realistic values” of oil and natural gas once shipping resumes.
Inventory behavior offers another clue. The EIA projects sharp draws in coming months as Middle East supply stays offline. Those draws limit downside even if talks advance. Yet any meaningful diplomatic progress could trigger a swift reversal. Markets remain headline-driven. One positive statement from negotiators sends prices lower. Renewed stalemate pushes them higher. This volatility masks deeper shifts in the oil balance.
OPEC+ finds its influence tested. The group managed production cuts for years to defend prices in the $60s. Now it confronts a war-induced deficit that removed far more supply than any voluntary cut. At the same time, it must prepare for the eventual return of that barrels-per-day volume. Members debate how quickly to unwind existing restraints. The June meeting will offer hints. A modest July hike signals confidence that the market can absorb extra supply without collapsing. But participants know the Hormuz situation remains fluid.
Global economic growth has shown resilience so far. That supports some demand. Yet higher energy costs feed into broader inflation. Central banks watch closely. Consumers already report weaker sentiment. In the United States, measures hit record lows not seen since the 1950s. Expectations for inflation over the next year climbed. The parallel to 1970s oil shocks feels uncomfortable to some observers. Others dismiss it. The scale differs. The policy response would too. Still, the risk of stagflationary pressure lingers in the background.
Longer term, the outlook hinges on three variables. How quickly does the Strait reopen? How fast can damaged infrastructure return to service? And how aggressively will OPEC+ manage its response? Answers remain elusive. Repair work in the Gulf could take months or years. Diplomatic efforts show incremental movement without resolution. Production from the Atlantic Basin provides some offset but cannot fully replace lost Middle East volumes in the near term.
Analysts at Capital Economics and Fitch Solutions both see elevated prices persisting deep into 2026 and beyond. The IEA and EIA present more nuanced paths that include eventual price declines. No single forecast commands consensus. Prices near $100 reflect that split. They embed a risk premium for continued conflict. They discount hopes for rapid normalization. They also price in demand weakness that could intensify if economies slow.
Traders will keep watching the June 7 OPEC+ meeting. They will monitor any statements from U.S. and Iranian officials. They will track tanker movements near the Strait. Each data point feeds the next price swing. For now the balance tilts toward caution. Supply losses dominate. Demand erosion builds slowly. The result is a market that rises on bad news about talks and still finishes the week lower. Fragile. Unpredictable. And far from resolved.
WebProNews is an iEntry Publication