Brent crude topped $106 a barrel on Monday after planned US‑Iran ceasefire talks collapsed when Washington pulled envoys and Tehran’s delegation left before direct talks, leaving a geopolitical premium on oil. US crude for June traded near $95 as constrained flows through the Strait of Hormuz and tight inventories underpinned prices.

Prices and immediate drivers Brent futures climbed to roughly $106.5–$107 a barrel on Monday, while US crude for June stood near $95.23 per barrel. Traders say the gap between prompt barrels and expectations for future supply reflects a persistent risk premium tied to the US‑Iran confrontation and threats against commercial shipping in the Gulf. Oil markets have tightened even where output itself hasn’t been cut directly. Goldman Sachs told clients that delayed normalisation of Gulf exports and a slower production recovery are pushing global inventories into unusually large draws. Other market watchers are adjusting their outlooks. Some firms have suggested a higher price floor for Brent this year if flows through the Strait of Hormuz do not fully reopen, and a number of strategists warn the probability of extreme supply‑side shocks remains elevated. Diplomatic breakdown and shipping disruption The recent climb in prices followed the collapse of a planned second round of ceasefire negotiations in Pakistan, after Washington pulled planned envoys and Tehran’s delegation left before direct talks. That diplomatic impasse has concrete effects on shipping: commercial traffic through the Strait of Hormuz has fallen sharply from pre‑conflict levels, creating a physical bottleneck that underpins price risk. Market positioning and broader financial reaction Despite higher oil, equities have shown resilience. Global stock indices largely recouped early losses from the outbreak of hostilities and opened higher in Asian trade, with Japan’s Nikkei and South Korea’s Kospi notably positive on Monday. Traders and fund managers are balancing persistent geopolitical left‑tail risk against structural growth drivers cited by some strategists. Key market takeaways: - Geopolitical risk is keeping a premium on prompt crude prices. - Shipping disruptions through Hormuz are tightening physical balances even without direct output cuts. - Rising oil could lead to demand destruction if sustained, feeding back into broader markets. Forecasts and the price floor debate Some forecasters have already moved their targets higher amid the diplomatic pause and tighter physical markets. A monthly Reuters poll of economists and analysts has nudged up estimates for average crude prices this year compared with previous surveys, reflecting these risks.

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A monthly Reuters poll has nudged up estimates for average crude prices this year, reflecting the heightened supply risks linked to the diplomatic pause and thin shipping through Hormuz.

This article was created with AI assistance.