Oil Price Today (May 26): Crude oil nears $100 as US strikes southern Iran. What are experts saying?

Brent crude futures rose nearly 2% on Tuesday, a day after hitting a two-week low, after the U.S. military launched strikes in southern Iran, describing the action as defensive in nature. The developments kept markets tense as hopes of a deal to end the ongoing conflict remained uncertain.

The U.S. Central Command said it had carried out strikes on targets in southern Iran, including boats allegedly attempting to lay mines and missile launch sites. According to the military, the strikes were aimed at protecting U.S. troops from threats posed by Iranian forces.

Crude oil price on May 26

Brent crude gained $1.40, or 1.5%, to trade at $97.56 a barrel, recovering after a steep 7% fall in the previous session. U.S. West Texas Intermediate crude traded at $91.25, marginally above Monday’s last traded level, though still down $5.30, or 5.5%, from Friday’s close. There was no official settlement on Monday because of the U.S. Memorial Day holiday.

Iranian media reported explosions in Bandar Abbas and nearby coastal regions along the Strait of Hormuz on Monday. Since the war began, Tehran has effectively halted most non-Iranian shipping through the Strait of Hormuz, disrupting nearly one-fifth of global oil and gas flows and pushing prices sharply higher.

Iran’s foreign minister and the country’s top negotiator were in Doha on Monday for discussions with Qatar’s prime minister regarding a possible agreement with the U.S. to end the three-month-long conflict.

Both Washington and Tehran said progress had been made on a memorandum of understanding that could pause the war and allow negotiators 60 days to work toward a final agreement.

U.S. President Donald Trump on Monday reiterated his demand that Iran surrender its enriched uranium to the United States for destruction.

The attack comes just a few days after Trump said Washington and Tehran had “largely negotiated” a memorandum of understanding on a peace deal that could reopen the Strait of Hormuz, through which nearly one-fifth of global oil and liquefied natural gas shipments moved before the conflict.

Iran has maintained a blockade in the Strait of Hormuz since early March, requiring vessels to obtain clearance before crossing or risk being targeted. The restrictions followed U.S. and Israeli strikes that killed Iran’s Supreme Leader Ayatollah Ali Khamenei along with several senior leaders.

The Strait of Hormuz remains one of the world’s most important energy chokepoints. Before the conflict, roughly 20% of global oil supply passed through the route. Iran’s blockade has sharply reduced Middle Eastern crude exports, resulting in what has been described as the biggest supply disruption on record.

Analysts believe that even if an agreement is reached, it could take months for shipping activity through the strait to fully recover and for damaged energy infrastructure to be restored.

Earlier this month, Saudi Aramco CEO Amin Nasser warned that disruptions in Hormuz could delay stability in global oil markets until 2027, with close to 100 million barrels of oil supply per week potentially affected. Saudi Aramco is the world’s largest oil producer.

Morgan Stanley said the oil market was currently in “a race against time,” warning that the factors preventing crude prices from rising even further may weaken if the Strait of Hormuz remains closed through June.

The brokerage said higher U.S. crude exports and softer Chinese demand have so far helped cushion the supply shock. However, it cautioned that a prolonged closure of Hormuz could tighten global supplies once again if disruptions continue beyond what the U.S. and China are able to absorb comfortably.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)