Oil prices experienced a notable increase of over 3% on Tuesday, as the closure of the Strait of Hormuz continues to severely impact energy supplies from the Middle East. However, prices trimmed their gains after the UAE announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+).
Brent crude futures for June rose by 3.1%, reaching $111.60 per barrel by 13:36 GMT, after recording a 2.8% increase in the previous session. Meanwhile, West Texas Intermediate (WTI) crude for June climbed by 3.7%, hitting $100.09 per barrel, surpassing the $100 mark for the first time since April 13.
Details of the Event
Some of the gains in oil prices were erased following the UAE's announcement on Tuesday regarding its withdrawal from OPEC and OPEC+, effective from May 1, 2026. The UAE news agency reported that this decision is part of the country's long-term strategic and economic vision, reflecting the evolution of its energy sector.
An American official noted that former President Donald Trump is dissatisfied with Iran's latest proposal to end the conflict, while Iranian sources revealed that the proposal avoids addressing Tehran's nuclear program until the war is halted and maritime disputes in the Gulf are resolved.
Background & Context
Iran has been blocking navigation through the Strait of Hormuz, through which approximately 20% of global oil and gas consumption passes, while the United States continues to impose a blockade on Iranian ports. The Strait of Hormuz is a vital artery for global supplies, increasing the geopolitical risks associated with oil prices.
In this context, Jorge Leon, an analyst at Rystad Energy, stated that oil prices exceeding $110 per barrel reflect a market quickly reassessing geopolitical risks. He emphasized that the stalled peace talks and the lack of a clear path to reopen the strait heighten the risks associated with oil prices.
Impact & Consequences
The loss of approximately 10 million barrels per day of crude oil and products through the Strait of Hormuz is expected to exacerbate the imbalance in the oil market, especially with rising inflationary pressures and declining demand. This could lead to further price increases, impacting the global economy.
Tamas Varga, an analyst at PVM, added that any agreement between the United States and Iran would be limited and partial, leaving the strait issue unresolved and increasing the risks associated with oil prices.
Regional Significance
The UAE's withdrawal from OPEC and OPEC+ is a significant step reflecting changes in the country's oil policy, which may affect the stability of oil markets in the region. The continued closure of the Strait of Hormuz reflects geopolitical tensions in the Gulf, increasing uncertainty in energy markets.
In conclusion, the situation in the oil market remains volatile, with prices influenced by political and economic developments in the region. Oil-producing and consuming countries must closely monitor these developments, as they may impact their future strategies.