Recent tensions in the Middle East have re-emerged as a primary driver of volatility in global markets. Iran's announcement to once again close the Strait of Hormuz has cast uncertainty over this critical global energy transit route. This strait handles approximately 20% of the world's seaborne crude oil shipments. Any disruption to passage would directly impact global energy supply chains, thereby increasing the risk premium on crude oil.
Following the resumption of trading after the weekend, crude oil futures prices rebounded sharply. The NYMEX May WTI crude contract climbed to near $90 per barrel, a gain of nearly 7%, while the more active June contract also rose to $88.43 per barrel. Brent crude followed suit, with the June contract reaching $96.86 per barrel. Refined products also saw significant recoveries, with Ultra-Low Sulfur Diesel (ULSD) and gasoline futures rising, reflecting growing market concerns about the supply of refined products.
Despite the strong rebound, it is important to note that this rally has not fully recovered the previous losses. Prices had fallen sharply earlier on expectations that the Strait of Hormuz might reopen for navigation, with a single-day drop approaching 9%. This high volatility indicates that current oil price movements are highly dependent on rapid changes in the geopolitical situation, with market sentiment swinging between fears of "supply disruption" and hopes for "diplomatic de-escalation."
In financial markets, rising energy prices have quickly translated into higher inflation expectations. U.S. Treasury yields moved higher across the board, with the 2-year yield rising to 3.74% and the 10-year yield climbing to 4.28%, both up approximately 3 basis points. Simultaneously, the U.S. dollar spot index gained about 0.2%, indicating increased demand for dollar-denominated assets against the backdrop of rising inflation expectations. This combination suggests markets are reassessing the impact pathway of energy prices on the macroeconomy.
From a fundamental supply and demand perspective, market surveys indicate that Goldman Sachs views current oil price risks as roughly balanced. The firm maintains its forecast for 2026 average prices of $83 per barrel for Brent and $78 per barrel for WTI, assuming Strait of Hormuz transit gradually returns to normal by mid-May. However, Goldman Sachs also warned that if supply recovers faster than expected while demand remains weak, oil prices could face further downward pressure.
Changes on the demand side also warrant attention. The high oil price environment is curbing end-consumption, particularly evident in petrochemical feedstocks and jet fuel. Preliminary estimates suggest the global demand decline in early 2026 has already exceeded the magnitude seen in many past oil price surge cycles, with the impact particularly pronounced in Asian countries and African emerging markets, which are more sensitive to price fluctuations.
Overall, the crude oil market is currently in a typical phase of high volatility. On one hand, the supply side is dominated by geopolitical risks, where any military or political development could rapidly alter price direction. On the other hand, demand-side weakness is gradually becoming apparent, creating medium-term downward pressure on prices. This combination of "short-term supply shock and medium-term demand weakness" creates a clear structural divergence in the market.
From a technical perspective, on the daily chart, WTI crude oil prices have reclaimed a key range following a significant previous correction. The $90 per barrel level now constitutes a key short-term resistance point, while the $85 per barrel area provides initial support. The overall trend has shifted from sideways to slightly stronger, with some recovery in momentum. Observing the 4-hour chart, prices have entered a consolidation phase after a rapid ascent, suggesting a near-term need for a technical pullback. If a retracement holds above the support zone, the rebound structure could continue; conversely, a break below key support could see prices re-enter a sideways trading range.
In summary, the core driver for the current crude oil market remains the impact of geopolitical risks on the supply side. This factor is reinforcing inflation expectations by pushing oil prices higher, thereby putting pressure on bond markets. In the short term, if tensions surrounding the Strait of Hormuz persist, oil prices may retain upward momentum, but expectations for diplomatic negotiations will likely cap the upside. From a medium to long-term perspective, weak demand and the pace of supply recovery will be the key variables determining the direction of oil prices. Investors should closely monitor developments regarding the resumption of transit and potential inflection points arising from changes in global demand.