Oil prices surge amid Strait disruptions and uncertain US-Iran talks

Oil prices rose nearly 1 percent on Tuesday as peace negotiations between the United States and Iran remained fragile. Tehran's response to a Washington proposal highlighted significant differences, keeping concerns about global oil supply elevated.

Key Highlights

• Oil prices rose nearly 1 percent amid fragile US-Iran peace talks
• OPEC oil output in April fell to its lowest in over twenty years
• Disruptions at a key strait led producers to cut exports
• Saudi Aramco CEO warned disruptions could delay market stability until 2027
• US imposed new sanctions related to Iranian oil shipments to China

Brent crude increased by 86 cents, or 0.8 percent, reaching $105.07 per barrel. US crude gained 99 cents, or 1 percent, to $99.06 per barrel at 0411 GMT. Both benchmarks had climbed almost 2.8 percent on Monday.

Strait Disruptions Impact Exports

Disruptions near the closure of a key strait have led oil producers to reduce exports. The strait handles about one-fifth of the world's oil and liquefied natural gas shipments. A Reuters survey on Monday showed that OPEC oil output in April dropped to its lowest level in over twenty years.

Saudi Aramco CEO Amin Nasser warned on Monday that continued disruptions could delay a return to market stability until 2027. He estimated a loss of about 100 million barrels of oil per week if exports through the strait remain affected.

Peace Talks and Market Reactions

US President Donald Trump stated on Monday that the ceasefire with Iran was "on life support." He cited disagreements over several issues, including ending hostilities, lifting the US naval blockade, resuming Iranian oil sales, and compensating for war damages. Tehran also asserted its sovereignty over the strategic strait.

Suvro Sarkar, energy sector team lead at DBS Bank, noted that optimism for a peace deal is fading. He warned that if no agreement is reached by the end of May, oil prices could face further upward pressure.

Tim Waterer, chief market analyst at KCM Trade, said a breakthrough in peace talks could cause oil prices to drop by $8 to $12. However, any escalation or renewed threats to block the strait could push Brent crude above $115 per barrel.

Other Market Factors

Analysts in a Reuters poll forecast that US crude stocks fell by about 1.7 million barrels in the previous week. Walt Chancellor, an energy strategist at Macquarie Group, said the draw occurred amid strong net waterborne export flows for crude and products, expected to continue in the coming weeks.

Market participants are also watching for outcomes from President Trump's planned meeting with Chinese President Xi Jinping later in the week. This follows new US sanctions on three individuals and nine companies for facilitating Iranian oil shipments to China.

Also Read: India Faces Unprecedented Fuel Price Dilemma Amid Prolonged Straits of Hormuz Closure

CarBike 360 Says

Amid ongoing disruptions in critical maritime routes and stalled diplomatic efforts, oil markets are expected to remain highly sensitive to geopolitical developments. Any escalation or breakthrough in US-Iran talks could significantly shift price trends. Until then, uncertainty will likely dominate, keeping traders cautious and global energy markets under sustained pressure.