Abu Dhabi, United Arab Emirates – May, 2026: Oil markets remain locked in a battle between hopes for diplomacy and mounting geopolitical risks, with supply concerns continuing to dominate price action and sentiment.
According to Nagham Hassan, Market Analyst at eToro, the market has moved beyond pricing in a temporary geopolitical premium and is now reacting to what increasingly resembles a structural supply shock.
“Since the conflict in the Gulf escalated earlier this year, crude prices have risen by more than 60%, reflecting not just fear but a fundamental repricing of global energy markets,” said Hassan. “The Strait of Hormuz remains the key focal point for investors, and until there is a credible path toward reopening this critical chokepoint, volatility is likely to remain elevated.”
Supply disruptions have continued to worsen, with losses estimated at 13 million barrels per day in May, compared with 11.8 million barrels per day in April. At the same time, expectations for tighter balances have pushed forecasts higher, with S&P Global projecting Dated Brent at $118 per barrel in May and potentially reaching $125 per barrel in June as seasonal demand strengthens.
Despite the severity of the disruptions, several temporary supply offsets have helped prevent prices from moving even higher. The UAE increased exports above normal pipeline capacity by drawing on storage reserves, while Russia boosted exports amid refinery maintenance that redirected barrels toward international markets. Additional support came from accelerated releases from the US Strategic Petroleum Reserve and a slowdown in China’s strategic stockpiling activity.
“Those emergency buffers provided short-term relief, but they are finite and already beginning to fade,” Hassan added. “As we move into June, the market faces a more difficult backdrop, with stronger seasonal fuel demand colliding with tightening inventories and fewer available supply offsets.”
Diesel inventories across the US and Europe remain at multi-year lows, while jet fuel inventories have reached record lows and gasoline stockpiles continue to deteriorate. Meanwhile, Asian refiners that had been relying heavily on local inventories are expected to increasingly compete for Atlantic Basin barrels, adding further pressure to the global crude market.
For investors, Hassan noted that the risks remain heavily asymmetric.
“A diplomatic breakthrough could remove part of the geopolitical premium relatively quickly, but restoring physical supply would take significantly longer due to damaged infrastructure, shipping disruptions, insurance constraints and refinery restart timelines,” said Hassan. “At the same time, any further escalation risks pushing energy prices to levels that could materially impact global growth, inflation and corporate earnings.”
While neither a rapid de-escalation nor a deeper supply crisis appears imminent, Hassan believes oil markets will remain exceptionally sensitive to developments in the Gulf in the near term.
“The market is now trading headline by headline,” Hassan concluded. “Until there is greater clarity around the Strait of Hormuz and regional stability, uncertainty is likely to remain the defining feature of global energy markets.”
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