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. The EIA slightly lowered its Brent crude price outlook for 2026 while raising its 2027 forecast, reflecting a shift in the expected supply-demand balance.
Near-term prices were supported by tighter market conditions driven by supply disruptions and lower inventories, while expectations of weaker demand growth and improving supply conditions shaped the medium-term outlook. The agency still expects prices to ease into 2027 as markets normalize.
Disruptions in the Strait of Hormuz are expected to keep global oil markets tight after 10.5 mmb/d of Middle East crude output went offline in April, the EIA said.
Brent crude is seen averaging about $106/bbl in Q2 2026 as global inventories fall sharply, according to the EIA STEO. The agency expects prices to later ease to about $89/bbl in Q4 2026 and $79/bbl in 2027 as Middle East supply gradually recovers.
Crude and petroleum product flows through the Strait of Hormuz fell to 14.6 mmb/d in Q1, down from 20.7 mmb/d in Q4 2025 and 20.4 mmb/d in Q1 2025, according to the EIA's Global Energy Security data released Wednesday.
However, the market's mid-week pullback was abruptly reversed on Friday as physical shipping threats flared up once again.
Sentiment soured rapidly following reports from the United Kingdom Maritime Trade Operations that a commercial vessel was boarded and seized by unauthorized personnel at the entrance of the Strait of Hormuz and forced into Iranian waters.
This incident closely followed the confirmed sinking of an Indian merchant ship in the nearby Gulf of Oman.
Compounding the physical supply friction, the US Central Command said in an X post on Friday, "As of today, 75 commercial vessels have been redirected and 4 have been disabled to ensure compliance."
On the supply front, US crude oil inventories decreased by 4.3 million barrels to 452.9 mmbbls in the week ended May 8, the EIA said in its weekly report on Wednesday.
Crude inventories are now about 0.3% above the five-year average for this time of year, the EIA said.
The US oil rig count rose by five from 410 the previous week to 415, in the week ending May 15, according to data from Baker Hughes (BKR) released Friday. That compares with 465 oil rigs in operation a year earlier.
The consolidated North American oil and gas rig count, a key early indicator of future production levels, rose by three to 675 from 672 the previous week.
Money managers in the WTI crude futures and options markets maintained their net long positions in the week ended May 12, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released on Friday.
The data showed that money managers reported 214,128 long positions, up 89 from May 5, while short positions increased by 2,462 to 82,083.