Energy Crisis Reshapes Global Markets

The Trump administration on Saturday allowed a sanctions waiver to lapse that had previously allowed countries including India to buy Russian seaborne oil after a month-long extension aimed at easing oil supply shortages and high prices due to Iran's closure of the Strait of Hormuz , according to Reuters. The move comes as U.S. gasoline prices are currently at about $4.50 a gallon, the highest since 2022 , and both domestic and international oil prices have hovered around or above $100 per barrel since the war began on February 28 .

Data from Kpler showed India's imports of Russian oil rose to a record 2.3 million barrels per day in May as refiners accelerated buying under the temporary authorization . Treasury Secretary Scott Bessent told a Senate panel that "more than 10 of the most vulnerable and poorest countries in terms of energy" had sought an extension , but the sanctions waivers had triggered criticism from some European allies, who argued that easing restrictions on Russian crude undermined efforts to cut Moscow's oil revenues during the Ukraine war .

Can Argentina Fill the Supply Gap?

Local and international energy companies are vying for additional exploration blocks in Argentina's Vaca Muerta shale basin as the Middle East crisis and the blocked Strait of Hormuz are reigniting a global race to tap resources outside conflict zones , according to OilPrice.com. Argentina has opened 15 new exploration blocks to both international and domestic energy firms—the largest such auction since 2016 and more than double the six blocks offered in the previous provincial round .

The Argentinian shale play is already outperforming U.S. plays such as the Permian, Bakken, and Eagle Ford on well productivity measures, Rystad Energy reckons, and expects crude production from Vaca Muerta to top 1 million bpd by the end of the decade . "Argentina is offering international companies their best organic entry point into Vaca Muerta in a decade," Jai Singh, Head of US Oil & Gas Research at Rystad Energy, said . Breakeven prices across the most promising blocks range from $32 to $49 per barrel, competitive with many established global shale plays .

U.S. shale giant Continental Resources, the company founded by Harold Hamm, earlier this year doubled down on its shale expansion outside the U.S. with an acquisition of stakes in four Vaca Muerta blocks . Mercuria-backed Phoenix Global Resources is preparing a $6 billion expansion in Argentina's Vaca Muerta shale, as President Javier Milei's RIGI incentives boost investor confidence and accelerate drilling activity , according to World Oil.

What Happened to OPEC's Unity?

The United Arab Emirates has announced its withdrawal from OPEC and the wider OPEC+ framework, removing a core pillar of one of the most influential groups in the energy world. The Gulf country, with a capacity of approximately 4.8 million barrels per day and significant room to increase output, announced on Tuesday that it would quit the organisation to focus on "national interests" , Al Jazeera reported.

The country plans to expand production capacity from about 3.4 million barrels per day to 5 million barrels per day by 2027, supported by upstream investment , according to Gulf News. UAE Energy Minister Suhail Mohamed al-Mazrouei said the move followed a review of national energy strategy. "This is a policy decision, it has been done after a careful look at current and future policies related to level of production," he told Reuters .

Before the start of the war, the UAE's production capacity had grown to 4.8 million bpd, but under its OPEC agreement, it was only allowed to produce 3.2 million bpd . The UAE could potentially flood the market with its 1.6 million bpd of extra production – equivalent to about 1.5 percent of global oil supply – enough to give it a serious edge in the global energy market, experts say .

How Bad Is the Hormuz Disruption?

The shipping crisis in the Strait of Hormuz is now "the largest supply disruption in the history of the global oil market", according to the head of the International Energy Agency, Fatih Birol . The closure of the Strait of Hormuz has led to the largest oil market disruption in history. Global oil supply crashed by 10.1 mb/d in March, due to attacks on energy infrastructure and restrictions on tanker traffic in the Middle East , according to the World Bank.

Strait of Hormuz oil flows collapsed from approximately 20 mb/d to roughly 1 mb/d following the outbreak of hostilities, a reduction exceeding 90 to 95 percent of prior volumes . By the end of March, the Brent price had increased by about 65 percent ($46/bbl) to record its highest monthly rise ever, amid pronounced volatility .

According to market data, WTI Crude traded at $71.50 per barrel on Friday, up 0.6%, while Brent Crude stood at $75.20 per barrel, up 0.5%. However, oil prices are expected to remain high, with Brent averaging $86/bbl in 2026 before dropping to $70/bbl in 2027 as supply stabilizes. This forecast assumes that the most acute phase of supply disruptions related to the conflict in the Middle East ends in May .

Why Should Energy Investors Care About Fertilizer?

About a third of the world's basic fertilizers now pass through the Strait of Hormuz , according to Adam Hanieh, director of the SOAS Middle East Institute at the University of London, speaking to Democracy Now. Urea prices jumped by nearly 46% in a month, as geopolitical and energy shocks hit nitrogen supply chains , Nature reported.

Nearly half of the world's traded urea – the most widely used fertiliser – and large volumes of other fertilisers are exported from Gulf countries via the Strait of Hormuz, making global agriculture highly exposed to any disruption there , Al Jazeera reported. Urea export prices from the Middle East have surged by about 40 percent, rising from just less than $500 to a little more than $700 per metric tonne .

The World Food Programme has warned that global food systems are under severe strain, with more than 360 million people facing acute food insecurity in 2026 and tens of millions at risk of famine . About a third of the world's fertilizer supply passes through the Strait of Hormuz, and its effective closure is causing shortages and price spikes for fertilizer during the crucial spring planting season , PBS NewsHour reported.

The US is already close to 25 percent short of fertiliser supply for this time of year . After its LNG facilities were attacked, Qatar's state-run energy firm, QatarEnergy, halted output at what is the world's largest urea plant after it shut down gas output. Since LNG output from Qatar has dropped off, India has cut output from three of its own urea plants. Bangladesh has also shut four out of its five fertiliser factories .

What Changed This Week

The energy landscape shifted dramatically as the U.S. allowed Russian oil sanctions relief to expire despite tight global markets, removing a temporary supply cushion that had helped India and other importers cope with Hormuz disruptions. Meanwhile, the UAE officially operates outside OPEC constraints for the first time since 1967, fundamentally altering the cartel's ability to manage production quotas. Argentina emerged as the week's bright spot, with major international players rushing into Vaca Muerta as companies seek politically stable shale resources far from Middle Eastern chokepoints.

What to Watch

The World Bank forecast assumes that the most acute phase of supply disruptions related to the conflict in the Middle East ends in May and that oil exports from the Middle East will recover and stabilize around pre-war levels by the final quarter of the year . Oxford Energy analysis indicates that even after the strait reopens, full restoration of pre-disruption export flows could require six months or more, accounting for infrastructure repair requirements, tanker fleet repositioning, and insurance market normalisation .

Watch for Argentina's bid round results in coming weeks, as the 15-block auction will signal whether international majors are truly committed to diversifying away from Middle Eastern supply. There's an 80 percent chance that an El Niño will develop this year, and there is a 25 percent chance this will be a "super" El Niño, intense enough to cause globally catastrophic extreme weather , which could compound fertilizer shortages with reduced crop yields. Monitor whether China lifts fertilizer export restrictions, as analysts suggest possible nitrogen exports by May and phosphate by August could provide critical relief to global agricultural markets.