Oil Settles Lower After Surge

Brent crude cooled off after ripping to a four-year high as the market braced for a protracted US war with Iran, in a session marked by machine-led trading and thin volumes.

The global benchmark's June contract edged lower to settle near $114 a barrel after earlier surpassing $126 — the highest since the aftermath of Russia's invasion of Ukraine in 2022. Volumes were low ahead of its expiry at the end of the session as investors closed out positions, contributing to heightened volatility. Some traders suggested prices were moving closer in line with the next, lower-priced July contract.

Outside of Thursday's sleepy trading, prices have ripped higher this week with the US and Iran at a deadlock. The stalled peace negotiations also leave in limbo the fate of the Strait of Hormuz, the vital energy shipping route that was essentially shut down by Tehran after the war began in late February and which has endured added pressure by a US naval blockade of Iranian ports.

Further subduing price action, trend-following commodity trading advisers flipped to 100% maximum long on Friday in Brent, suggesting they've exhausted buying capacity for this session, according to Kpler. Robot traders positioned in WTI futures are currently 91% long, the firm added.

"I can't say this enough — the market can honestly do whatever it wants as liquidity is awful and client interest in trading is a fraction of what it was in March," Scott Shelton, an energy specialist at TP ICAP Group Plc wrote in a note. Since human participation is depressed, algorithmic traders are in the driver's seat, he added.

The market conditions tamed the impact of bullish developments that had briefly sent oil soaring in Asian trading hours. Axios reported the head of US Central Command, Admiral Brad Cooper, would brief US President Donald Trump on resuming military options in Iran.

The supply disruption caused by the closure of the Strait of Hormuz has sent energy prices surging, leading to fuel shortages and predictions of higher inflation and slower global growth.

Some of the world's top oil traders have warned the shock will also erode demand. The euro-area economy unexpectedly slowed at the start of 2026, with soaring energy costs triggered by the Iran war threatening stagflation in the months ahead.

The gap between paper and physical prices is narrowing as tangible domestic tightness begins to materialize for the first time since the war began. US crude exports surged to a record last week as global buyers tapped American producers for barrels to replace lost supply from the Middle East. Overseas shipments rose above 6 million barrels a day, eclipsing a previous high of nearly 5.3 million set in late 2023.

"We reiterate that time is of the essence for energy markets. Without an opening of the Strait of Hormuz, the barrel math remains grim and is increasingly getting worse with less Iranian supply," said Ryan McKay, senior commodity strategist at TD Securities. "As things stand, it is inevitable that inventories will hit multi-year lows and could potentially reach minimum operating levels as early as this summer."

On Tuesday, Trump discussed steps the US could take to prolong its blockade while minimizing the impact on American consumers at a meeting with oil and trading executives, the White House said.

"Trump has ripped away the security blanket the market was clinging to — the hope that the war was about to end," said Robert Rennie, head of commodity research at Westpac Banking Corp. "Traders are now being forced to confront a much uglier reality: both sides still think they are winning, neither side has a clear incentive to negotiate, and energy prices are starting to accelerate higher."

Meanwhile, Iran's new supreme leader Mojtaba Khamenei gave a rare statement on Thursday, vowing not to give up the country's nuclear or missile technologies and signaling Tehran would keep control of the Strait of Hormuz. Iran's nuclear ambitions are at the heart of the conflict with US and ally Israel.

He also said the US naval blockade is an "extension of military operations," and "intolerable."

The US is also seeking the forfeiture of two Iran-linked oil tankers that were seized by naval forces. Forfeiture, or confiscating oil cargoes, would represent an escalation of Trump's economic offensive — and dovetail with Washington's strategy deployed after the ousting of Venezuelan President Nicolás Maduro.

Oil Prices

• Brent for June settlement was 3.4% lower to settle at $114.01 a barrel in New York.
  • The more active July contract was little changed at $110.40 a barrel.
• WTI for June delivery fell 1.7% to settle at $105.07 a barrel.