Key Highlights
- Brent crude declined below $95 following Tuesday’s 4.6% plunge; WTI hovers around $91
- US Central Command confirms Iran’s naval blockade now fully operational
- Trump indicates Iran conflict “very close to over,” additional negotiations anticipated within days
- Iran weighing voluntary suspension of Hormuz transit to sidestep US naval presence
- IEA and OPEC revise demand projections downward; Japan planning May emergency reserve release
Crude oil markets experienced dramatic volatility this week as market participants navigate conflicting developments: the completion of a comprehensive US naval blockade surrounding Iran alongside emerging indications that diplomatic negotiations may soon resume.
Brent crude experienced a 4.6% decline on Tuesday, sliding beneath the $95 per barrel threshold. West Texas Intermediate similarly retreated to approximately $91. Wednesday’s Asian trading session witnessed partial price recovery following US Central Command’s confirmation of the blockade’s completion.
Admiral Brad Cooper announced that American forces have “completely halted economic trade going into and out of Iran by sea.” President Trump subsequently claimed via social media that the US had placed Iran in a “chokehold” and suggested the nation might exhaust its storage infrastructure.
The maritime cordon was established merely two days following unsuccessful ceasefire negotiations in Pakistan. Washington now urgently seeks to convene a second negotiation round before the existing ceasefire agreement lapses next week.
Speaking with the New York Post, Trump indicated fresh discussions could materialize “over the next two days.” He further conveyed to Fox Business host Maria Bartiromo his assessment that the conflict appeared “very close to over.”
One diplomatic option under consideration involves reconvening in Pakistan for subsequent talks, although alternative venues remain under discussion.
Meanwhile, Tehran is reportedly evaluating whether to voluntarily halt shipments traversing the Strait of Hormuz to prevent direct engagement with the US naval barrier, according to sources with knowledge of internal deliberations.
Asian Markets Face Acute Supply Pressure
The Strait of Hormuz facilitates approximately 20% of global oil supply. Since hostilities commenced in late February, Iran has effectively blocked virtually all maritime traffic through this critical waterway.
ANZ analysts calculated that no fewer than 10 million barrels daily have been severed from global supply due to the conflict. Their analysis suggests that even absent worst-case escalation scenarios, constrained supply alone justifies sustained elevated Brent pricing.
Japan is positioning to deploy a second tranche of strategic petroleum reserves beginning early May. Refineries throughout the Asia-Pacific basin may additionally face operational curtailments, constraining jet fuel and diesel availability.
Both the International Energy Agency and OPEC have downwardly revised their petroleum demand projections, attributing the adjustments to price-induced consumption suppression.
Market Observers’ Perspectives
Dilin Wu from Pepperstone Group projected that crude markets will likely trade laterally with a “softer bias” near-term as participants digest the diplomatic pivot. He emphasized that even with de-escalation, physical supply normalization will lag due to logistical constraints around Hormuz.
ANZ’s forecast suggests that if confrontation risks diminish, Middle Eastern supply could experience phased restoration, with 2 to 3 million barrels per day potentially returning within the initial four-week period.
Rebecca Babin, senior energy trader at CIBC Private Wealth Group, observed that markets are “leaning toward a normalization of flows by the end of April.”
The American Petroleum Institute’s latest data showed US crude stockpiles expanded by 6.1 million barrels last week, potentially marking the eighth consecutive weekly accumulation pending Wednesday’s official government confirmation.
The Trump administration has additionally confirmed it will allow the waiver permitting restricted Iranian crude purchases to lapse this weekend.
