Oil Hits $111 as Hormuz Crisis Deepens

WTI crude oil futures climbed more than 4.5% to near $106 per barrel on Friday and booked a weekly gain of 11% as the Strait of Hormuz remained effectively closed , according to Trading Economics. Brent crude oil futures rose past $109 per barrel on Friday and added 8.1% for the week , the data provider reported. By Monday morning in Asian trade, the pressure intensified further. The current price of West Texas Intermediate (WTI) crude oil today is $107.35 per barrel , according to OilPrice.com, while OilPrice.com reported that Brent had climbed to $111.50 per barrel in early Monday trading.

The rally comes as last week's two-day summit between Trump and Chinese President Xi Jinping ended without any concrete progress toward reopening the Strait of Hormuz , Trading Economics noted. The International Energy Agency warned this week that the oil market could remain severely undersupplied until October even if fighting ends next month , according to the data provider's analysis.

Can the Market Absorb a Billion-Barrel Loss?

The scale of the supply disruption is staggering. The oil market will lose 100 million barrels of supply every week Hormuz is closed, the CEO said. The total net loss so far is 880 million barrels , Saudi Aramco CEO Amin Nasser told investors on the company's first-quarter earnings call, according to CNBC. "If the Strait of Hormuz opens today, it will still take months for the market to rebalance, and if its opening is delayed by a few more weeks, then normalization will last into 2027," Saudi Aramco CEO Amin Nasser told investors , CNBC reported.

The biggest challenge facing the market is the disruption to the global tanker fleet, Nasser said. More than 600 ships, mostly oil and product tankers, are currently stuck in the gulf, he said. Around 240 ships are waiting outside Hormuz , according to the CEO's remarks reported by CNBC. Just two to five ships pass through Hormuz daily right now compared with 70 vessels before the war, he said , CNBC noted.

The International Energy Agency's May report painted an equally dire picture. Global oil supply declined by a further 1.8 mb/d in April to 95.1 mb/d, taking total losses since February to 12.8 mb/d. Output from Gulf countries affected by the closure of the Strait of Hormuz was 14.4 mb/d below pre-war levels , according to the IEA's Oil Market Report for May 2026. Global observed oil inventories drew by 129 mb in March and by a further 117 mb in April, according to preliminary data , the IEA reported.

Why Is China Cutting Refinery Runs?

While the Middle East grapples with export blockades, the world's largest crude importer is slashing processing. Chinese research firm Horizon Insight estimates China's throughput at 13.4 MMbpd in the week to April 17, down from 15.4 MMbpd in the week before the war started on February 28 , according to Hydrocarbon Processing. Reuters reported that China's April oil throughput hit the lowest level since August 2022, with inventories rising as refiners cut runs amid tight margins and supply disruptions.

Crude throughput at refineries rose just 1% year on year in the first quarter as a whole, but fell 2% in March after the closure of the Strait of Hormuz pushed up oil prices and squeezed refining margins , according to the Centre for Research on Energy and Clean Air's March 2026 snapshot. Following the Middle East crisis, China suspended refined fuel exports in March and extended the restriction into April, with limited exemptions for a small number of countries seeking assistance , the research center reported.

The supply crunch is forcing Asian refiners to adapt their crude slates with significant consequences for product yields. Of the nearly 12 MMbpd of crude unable to reach Asia in March due to the effective closure of the Strait of Hormuz, nearly 8 MMbpd was of medium density and high sulfur content, or medium sours, which most Asian refineries are designed to process to maximize diesel output , according to Vortexa data cited by Hydrocarbon Processing. A 1% to 2% drop in yields across Asia's roughly 30-MMbpd refining system could translate into a loss of around 250,000 bpd–500,000 bpd of diesel and jet supply , Rystad's Prakash told the publication.

Can Europe's AI Dreams Survive $200 Oil?

As oil prices surge, another energy crisis is unfolding in Europe's technology sector. The cost of securing data center capacity in Europe's five largest markets — Frankfurt, London, Amsterdam, Paris, and Dublin — is set to rise by 12% in 2026, according to research from real estate investment company CBRE , CNBC reported Sunday.

Europe wants to position itself as a leader in AI and compete with the U.S. and China — but experts told CNBC that its soaring energy prices could undermine those ambitions. The region is looking to get ahead in the AI arms by ramping up compute capacity and building out the critical infrastructure needed for the technology. But power-hungry data centers mean investments are particularly sensitive to the cost of energy, and Europe's prices are surging amid the U.S.-Iran war , according to the network's analysis.

Nowhere is this more visible than in Europe's most sought-after data center markets or what the industry calls the FLAP-D cities, or Frankfurt, London, Amsterdam, Paris and Dublin. The queues for grid connections have grown so long that they have effectively become a ban on development. "In the FLAP-D markets... new facilities wait on average 7 to 10 years for a grid connection, rising to 13 years in the most congested primary markets" , according to a report from Interface cited by Euronews.

The energy intensity of AI workloads is compounding the problem. Data centres are responsible for about 1.5%, or 415 Terawatt-Hours (TWh), of the world's total yearly electricity consumption. Projections indicate that their consumption is set to more than double towards 945 TWh by 2030, primarily due to the substantial growth of energy-intensive accelerated computing, which is used mainly for AI purposes , according to the European Commission's energy performance assessment.

What About Renewable Energy Tax Credits?

While fossil fuel prices soar, the U.S. renewable energy sector faces its own deadline crisis. The Residential Clean Energy Credit (Section 25D) also expired after December 31, 2025. Solar panels, battery storage systems, geothermal installations, and similar projects completed in 2026 or later do not qualify , according to tax advisory firm Stephano Slack.

The New Energy Efficient Home Credit (Section 45L) expires for homes acquired after June 30, 2026. Builders must ensure qualifying homes are completed and sold before that deadline. The Energy Efficient Commercial Buildings Deduction (Section 179D) expires for property where construction begins after June 30, 2026 , the firm noted in its February analysis.

The Financial Times reported that U.S. wind and solar projects are at risk as developers face labor and equipment shortages amid what the publication described as hostility from the Trump administration. For wind and solar projects seeking clean electricity production or investment credits under Sections 45Y and 48E, the deadlines are especially tight. To qualify, a project must either begin construction by July 4, 2026, or be placed in service by the end of 2027 , according to Stephano Slack's guidance.

What Changed This Week

Oil markets entered a new phase of crisis as Brent crude breached $111 per barrel and Saudi Aramco's CEO warned that normalization could stretch into 2027 even if the Strait of Hormuz reopens immediately. China's refinery throughput fell to a 44-month low as the world's largest crude importer grapples with supply disruptions and margin pressure, while suspending fuel exports to preserve domestic supply. Europe's AI ambitions collided with energy reality as data center costs jumped 12% and grid connection queues stretched to 13 years in major markets. Meanwhile, the U.S. renewable energy sector faces a June 30 cliff as major tax credits expire, with developers racing to meet construction deadlines.

What to Watch

The next critical milestone is the June 30, 2026 deadline for multiple U.S. energy tax credits, including Section 45L for energy-efficient homes and Section 179D for commercial buildings. On the oil front, watch for any diplomatic breakthrough between the U.S. and Iran that could begin reopening the Strait of Hormuz—though Saudi Aramco has warned that even immediate reopening would require months for market rebalancing. China's May refinery throughput data, expected in mid-June, will signal whether the world's largest importer can stabilize processing rates or if further cuts are coming. In Europe, the European Commission's Data Centre Energy Efficiency Package is planned for adoption in the second quarter of 2026, which could reshape how the continent balances AI ambitions with grid constraints. Finally, the IEA's June oil market report will provide updated projections on whether the supply deficit peaks this month as the agency previously forecast.