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US Oil Update: Futures Settle Higher After Trump Says Planned Iran Attack Put on Hold

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Crude futures rose in after-hours trading on Monday after President Trump called off a planned US military strike on Iran, easing immediate fears of a wider conflict in the Middle East while leaving markets cautious over the outlook for regional crude supplies.

Front-month West Texas Intermediate crude futures climbed 1.74% to $107.25 per barrel, while Brent futures were up 0.41% to $109.28 /bbl.

"The US and Iran remained far apart on a deal to end weeks of war and reopen the crucial Strait of Hormuz, with President Trump saying the clock is ticking for Iran," Saxo Bank strategists said in a note on Monday.

Trump called off a planned attack on Iran on Tuesday after the heads of three regional powers in the Middle East asked him to "hold off."

The US President said the leaders of Qatar, Saudi Arabia and the US told him serious negotiations are underway with Iran that will result in a deal acceptable to Washington.

However, Trump instructed the Pentagon "to be prepared to go forward with a full, large-scale assault of Iran, on a moment's notice, in the event that an acceptable deal is not reached."

Iran's Deputy Foreign Minister Kazem Gharibabadi said that any possible agreement with the US must ensure an end to the ongoing conflict on all fronts and lift the blockade and sanctions imposed against the country.

ING strategists said Monday that the ongoing supply disruptions mean the market has had to rely largely on inventory and, where possible, on alternative supply, including Russian crude.

Fundamental differences between the US and Iran remain unresolved, with Tehran demanding the return of frozen assets to the Iranian people and dismissing Washington's nuclear demands as political excuses.

On the supply front, the International Energy Agency executive director, Fatih Birol, said on Monday that commercial oil inventories were depleting rapidly, with only a few weeks' worth left due to the ongoing Middle East conflict and the closure of the Hormuz.

Birol, who is participating in the Group of Seven finance leaders meeting in Paris, told reporters that the release of strategic oil reserves had added 2.5 million barrels of oil per day to the market, but said these reserves "are not endless."

Meanwhile, Kpler said the US downstream operations are running at full capacity as refiners respond to tightening global fuel balances and surging export demand.

Refinery utilization is averaging almost 93%, supported by strong distillate and gasoline margins, lighter maintenance schedules, and rising reliance on Atlantic Basin supply, Kpler strategists said in a note on Monday.

Though a fragile ceasefire was reached in April, tensions between Iran and the US continue, with Tehran keeping the Hormuz closed, while Washington continues to blockade Iranian ports.

On Monday, Iran unveiled a new body, the Persian Gulf Strait Affairs Authority, to oversee activities related to the Strait.

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Weekly Crude Benchmarks Surge on Hormuz Disruptions, Geopolitical Gridlock

Oil benchmarks rose over the week as an escalating geopolitical gridlock and severe maritime security threats in the Middle East overrode short-lived diplomatic optimism.West Texas Intermediate settled at $105.66 per barrel, up from $94.68/bbl the previous week, while Brent closed at $109.18/bbl, up from $100.14/bbl a week earlier.WTI registered weekly gains of 10.48%, while Brent was up 7.79%.The upward weekly trajectory was fueled by the prolongation of an effective closure at the crucial Strait of Hormuz, which eroded global safety buffers and triggered supply anxieties that overshadowed high-level discussions between US President Donald Trump and Chinese President Xi Jinping in Beijing, analysts noted.Trump departed Beijing on Friday after meeting with President Xi during a two-day diplomatic visit to China without securing a breakthrough to end the blockade of the Strait of Hormuz.During a press briefing on Air Force One, Trump said he discussed lifting sanctions on Chinese companies purchasing Iranian oil with Chinese President Xi Jinping."... I'm going to make a decision over the next few days," Trump said about potentially lifting sanctions.The US recently sanctioned several Chinese refiners tied to Iran's oil trade as Washington expanded economic pressure on Tehran, while China has remained the largest buyer of Iranian crude shipments.China wants the Strait of Hormuz reopened as energy flows through the route remain heavily disrupted following recent tensions with Iran. "He'd like to see it opened up," Trump said.Wang Yi, China's Foreign Minister, said Friday that China wants the Strait of Hormuz reopened quickly while supporting efforts to maintain the ceasefire, China's state-owned media outlet Xinhua reported.China believes a permanent and comprehensive ceasefire offers the long-term solution to issues surrounding the Strait of Hormuz, Wang said during a press briefing in Beijing.Wang also said China encourages the US and Iran to continue resolving disputes, including nuclear-related issues, through negotiations.The week began with a sharp rally after President Trump rejected an Iranian peace counteroffer, labeling it "totally unacceptable" and declaring the existing ceasefire to be on "massive life support."This diplomatic collapse dashed market hopes for a quick fix, while momentum amplified as Washington levied new sanctions against an Islamic Revolutionary Guard Corps oil-shipping network accused of using front companies across Oman, Hong Kong, and the UAE to bypass restrictions.The physical severity of the 10-week blockade was laid bare by mid-week industry reports.The International Energy Agency's May oil market report confirmed that an unprecedented 14.4 million barrels per day of Gulf production was shut in, while Bloomberg satellite imagery showed Iranian export terminals grinding to a virtual standstill.ANZ analysts warned that if the chokepoint remains closed, the second quarter of 2026 will suffer the largest quarterly crude inventory drawdown in history at 6.5 mb/d.Crude prices experienced a temporary mid-week reprieve, pausing on Wednesday and retreating on Thursday following reports that Iran had allowed a limited convoy of about 30 vessels to cross the strategic chokepoint.This brief easing coincided with the Trump-Xi summit, though President Trump downplayed any imminent diplomatic breakthrough regarding the energy crisis.Bearish demand revisions also capped gains, as OPEC downgraded its 2026 global demand growth forecast to 1.2 mb/d and the IEA revised its outlook to a demand contraction of 420,000 b/d.Furthermore, OPEC data revealed that its April production had plummeted by 1.73 mb/d to 18.98 mb/d, a steep decline that reflected the final month of the UAE's membership in the producer group.Meanwhile, the Energy Information Administration released its May Short-Term Energy Outlook earlier this week. 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$BKR
Oil & Energy

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Oil & Energy

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