Ever since America announced a two-week ceasefire with Iran, there has been a significant decline in the prices of crude oil. According to the data, crude oil prices fell by more than 13 percent last week—the biggest weekly decline since 2020, or in six years. While Brent crude prices have fallen to $95 per barrel, WTI prices remain stable at $96 per barrel. Since the conflict began in late February, crude oil markets have been in severe turmoil; Still, prices remain 30 percent higher than levels before the Middle East war.
All eyes are now on the durability of the ceasefire announced this week, and whether a lasting peace can be achieved that would allow energy supplies through the Strait of Hormuz to resume. Traffic through this vital waterway is mostly limited to ships bound for Tehran.
In an interview with Bloomberg Television, Rapidan Energy Group President Bob McNally said the current selloff is unnecessary and a correction is likely to happen soon. He further said that, since we are facing a nightmare-like situation right now, people are desperate to believe that this will all end soon; As a result, they are relying on comforting words and verbal assurances. Oil markets are also keeping a close eye on whether the United States will extend a waiver that currently allows it to buy Russian crude already loaded in tankers.
Several Asian countries—which have faced fuel shortages in recent weeks—are pressuring the U.S. Treasury Department to maintain the exemption, according to experts familiar with the matter. The current grace period is set to end just after midnight Washington time. US Vice President JD Vance is expected to lead talks with Iranian officials in Islamabad, which are scheduled to begin on Saturday.
Iranian attacks continued this week, damaging the region’s energy infrastructure and causing further disruptions to oil supplies. Late Thursday, Saudi Arabia said the attacks had caused a reduction in the flow of oil through its East-West Pipeline—the same pipeline it uses to export oil through the Red Sea.
Countries were forced to use reserves
Countries that are heavily dependent on crude oil in the Middle East have now started using their oil reserves. Japanese Prime Minister Sanae Takaichi announced that during the month of May, Japan will release from its strategic oil reserves about 20 days’ worth of oil. Meanwhile, China’s state-owned refineries have been given the green light to use their commercial oil reserves.
India’s largest private refinery has started imposing limits on fuel sales at petrol pumps in an effort to manage its existing stockpiles. Although a two-week cease-fire was broadly in place throughout the Middle East, the continued closure of the Strait of Hormuz—as well as the ongoing fighting between Israel and Hezbollah in Lebanon—risks further complications for diplomatic negotiations.
The war of words continues
Trump posted on social media on Friday that the only power Tehran has is to “blackmail the world for a short period of time using international waterways”—an apparent reference to the Strait of Hormuz—and declared that “the Iranians probably don’t realize they have no cards left to play.” Mohammad Baqir Ghalibaf, speaker of Iran’s parliament, said in a post on X that for Iran, the cease-fire in Lebanon is a step that “must be completed under any circumstances before negotiations can begin.”
Trump told *The New York Post* on Friday that if talks fail, US warships are being re-equipped with “the very best munitions” to launch new attacks. On the other hand, Ukraine’s chief negotiator in talks with Russia said he sees some progress toward a possible peace deal.
