A Crude Market Once Again Driven by Geopolitical Nerves
The oil market ended the week with a sharp rebound, fuelled by persistent geopolitical tensions and a deepening supply deficit. Brent rose nearly 4% to around USD 108 per barrel, while US WTI climbed back above the symbolic USD 100 threshold. This upswing is not the result of a one-off shock but rather the market’s reaction to a series of negative signals, foremost among them the ongoing disruptions in the Strait of Hormuz.
The meeting between Donald Trump and Xi Jinping in Beijing failed to unlock the Iranian situation. Both leaders reiterated their determination to prevent Tehran from acquiring nuclear weapons and to reopen the strait, but no concrete progress emerged. Markets had hoped for a diplomatic gesture from Beijing, whose influence over Iran is considerable, yet the talks ended in stalemate. On the ground, risks remain elevated and oil flows continue to be disrupted.
Against this backdrop, insufficient supply has become the primary driver of rising prices. The International Energy Agency estimates that global production fell by 1.8 million barrels per day in April, while OPEC confirmed a decline of 1.73 million barrels per day, still including volumes from the United Arab Emirates, which officially left the cartel on 1 May. The market is thus confronted with a structural imbalance that is amplifying volatility.
An Investment Outlook Shaped by Supply Scarcity and Uncertain Demand
The current dynamics of the oil market rest on a paradox: supply is contracting rapidly while demand forecasts for 2026 remain deeply divided. The IEA now expects global demand to fall by 420,000 barrels per day, weighed down by persistent weakness in aviation and petrochemicals. OPEC, by contrast, maintains a resolutely optimistic view, projecting demand growth of 1.17 million barrels per day.
This divergence highlights the uncertainty surrounding the trajectory of global consumption. Energy-intensive sectors such as aviation have yet to regain their pre-pandemic momentum, while petrochemicals are suffering from a broader industrial slowdown. Yet baseline demand, particularly in emerging economies, remains solid, limiting the likelihood of a sharp reversal.
For investors, the decisive factor remains supply. Disruptions in the Persian Gulf, combined with OPEC’s production cuts and logistical bottlenecks, create an environment in which even a minor shock could push prices significantly higher. The market is in a configuration where geopolitics outweighs fundamentals, making forecasts particularly challenging.
Conclusion for Investors: A Market Under Pressure, Between Supply Deficit and Diplomatic Uncertainty
The rise in oil prices reflects a market dominated by supply scarcity and a geopolitical landscape that has once again become the main driver of volatility. Disruptions in the Strait of Hormuz, the lack of diplomatic progress between Washington, Beijing and Tehran, and the simultaneous contraction in global production create conditions in which upside risks clearly prevail.
For investors, oil remains a deeply asymmetric asset: any diplomatic breakthrough could trigger a rapid pullback, but the absence of progress, or further deterioration, could prolong the current tension. The divergence between IEA and OPEC forecasts adds another layer of uncertainty, complicating the market’s reading.
The energy sector is entering a phase in which visibility depends less on economic fundamentals than on the ability of major powers to stabilise a strategic region. Until that balance is restored, the oil market will remain exposed to abrupt movements and persistent volatility.