TradingKey – Global oil prices extended their rally on Monday. By the close of the U.S. market on April 27, Brent crude had risen 2.75% to $108.23 per barrel, while WTI rose 2.09% to $96.37 per barrel. Following the collapse of the second round of U.S.-Iran negotiations, the blockade of the Strait of Hormuz remains unresolved, and expectations of supply disruptions continue to drive oil prices higher. As of 18:00 Beijing Time on April 28, Brent crude had surpassed $111 per barrel.
[Brent crude futures price as of 18:00 Beijing Time on April 28; Source: Intercontinental Exchange (ICE)]
On April 12, the second round of negotiations between the U.S. and Iran in Islamabad collapsed, as the two sides were unable to bridge differences on key issues such as nuclear restrictions, passage through the Strait, and asset freezes. Following the breakdown, the Islamabad talks were shelved indefinitely. Since then, the U.S. has taken a harder line, while Iran has also signaled a firm stance that it will not reopen the Strait. Neither side shows a willingness to make substantive concessions, meaning the geopolitical premium is unlikely to fade in the short term.
Geopolitical tensions have materially impacted global energy corridors. Since the outbreak of the war in Iran in late February 2026, the order of passage in the Strait of Hormuz has changed. The Iranian Revolutionary Guard Corps is controlling the transit of civilian vessels, while the U.S. military is blockading Iranian ports, leaving both sides in a standoff.
According to the International Energy Agency (IEA), global oil supply fell by more than 10 million barrels per day in March, the largest disruption on record. This is the most severe single-month supply shock since the 1990 Gulf War, and recovery cycles are typically measured in months rather than weeks.
Shipping data shows that the blockade of the Strait of Hormuz has caused the Middle East to lose more than 12 million barrels of crude oil exports per day. Alternative routes, such as Saudi Arabia’s West Coast ports and the ITP pipeline from Iraq to Turkey, have limited capacity and cannot fill the maritime gap. Even if the Strait is partially restored, the global oil market will still face shortages in the short term.
On April 27, the International Atomic Energy Agency (IAEA) Board of Governors passed a resolution formally censuring Iran and demanding immediate cooperation with inspections, which Iran refused. Market expectations for a short-term peace agreement continue to cool, as neither the U.S. nor Iran has shown any willingness to negotiate recently. With diplomatic channels nearly closed, market expectations have shifted from a short-term ceasefire to a long-term standoff, and the market is repricing for long-term supply disruptions.
On April 26, Goldman Sachs raised its Brent crude price forecast for the fourth quarter of 2026 to $90 per barrel, primarily due to declining production in the Middle East and the heightened risk of disruptions in the Strait of Hormuz. Goldman analysts warned that high refined product prices and the risk of product shortages represent a shock of unprecedented scale.
On April 27, Citi raised its base-case Brent crude forecasts for the remainder of 2026, projecting average prices of $110, $95, and $80 per barrel for the second through fourth quarters, respectively. It also warned that if the transit disruption in Hormuz continues until the end of June, oil prices could rise to $150 per barrel.
The higher oil prices go, the higher the hurdle for rate cuts. As oil prices return to the $100 mark, March CPI rose 3.3% year-on-year, and the energy component jumped 10.9% month-on-month, further dampening expectations for a Fed rate cut. As of April 28, CME interest rate futures suggest the probability of a 25-basis-point cut in June is only about 4.5%.
The short-term direction of oil prices depends on the situation in the Strait of Hormuz and the progress of U.S.-Iran negotiations. Until then, oil prices are likely to trade at high levels within the $95 to $115 range. If the blockade of the Strait persists into the third quarter, prices could break above $120; if there is a diplomatic breakthrough, they could retreat to the $90-$95 range.
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