The International Energy Agency said the oil market is set to return to a surplus this quarter for the first time since the United States Iran war began, a shift that could cap prices even while the Strait of Hormuz stays dangerous. Brent crude settled 3.3 percent higher at 95.82 dollars after President Trump said the United States does not need a deal with Iran, but the surplus would pull in the opposite direction.
Why it matters
The surplus matters because the strait is still the centre of the crisis. Iran said an LNG tanker hit a mine, and its Revolutionary Guards said they targeted a United States radar in Bahrain. The Revolutionary Guards had already said two oil tankers were disabled by explosions in the strait, and shipping through the chokepoint has nearly stopped as operators and insurers pull back.
Buyers are already adjusting. India has demanded unimpeded shipping through the strait, and buyers are looking for alternatives, with African liquefied natural gas exports projected to soar as buyers flee Hormuz. The shift shows how quickly a security crisis in one waterway can redraw energy trade routes, and how fast a surplus elsewhere can blunt the price impact.
What happens next
The diplomacy has not stopped the attacks. The Abu Dhabi talks produced a prisoner exchange but no ceasefire, and the American envoys have since moved on to Moscow to meet President Vladimir Putin. Trump says no deal is needed, Iran says any new strikes will bring a wider response, and the tankers keep taking hits in between.
For now, the market is caught between fear and supply. If the surplus arrives as the agency expects, oil has a ceiling even with Hormuz in crisis. If the attacks widen, the fear premium will win. The next incident in the strait, not the next forecast, will decide which force is stronger.
The oil market has been pricing the risk for days. Oil rebounded from two month lows as the tanker attacks offset hopes for an Iran truce, and each new claim from the strait adds to the premium. Traders are watching the flow of ships as closely as the price of crude, because the strait is the chokepoint for the region energy exports.
