Oil Hits $111 as Iran War Deepens Crisis

Brent crude climbed to $111.50 per barrel in early Asian trade Monday, up 2.0% on the session, as drone attacks on both the UAE and Saudi Arabia further dimmed hopes of any de-escalation in the region , according to OilPrice.com. The lack of a breakthrough on an Iran agreement during Trump's visit to China also added to upward pressure for oil prices, with fears of major global shortages now rising rapidly .

The spike comes despite market data showing WTI crude at $71.50 per barrel and Brent at $75.20 per barrel as of Sunday—figures that now appear outdated as the conflict enters a more volatile phase. Trading Economics reported WTI crude rose to $107.72 per barrel on May 18, up 2.18% from the previous day , while Yahoo Finance showed Brent trading at $111.19, up 1.77% .

The International Energy Agency has characterized the situation as the "largest supply disruption in the history of the global oil market" and the "greatest global energy security challenge in history" . The conflict has caused the restriction of nearly all traffic through the Strait of Hormuz , which previously carried about 25% of the world's seaborne oil trade and 20% of the world's liquefied natural gas .

Can China's Refiners Weather the Storm?

China's crude oil surplus surged in April as refinery output dipped, with the amount of crude available for storage growing to 1.89 million barrels per day, the highest since June 2023 , according to Reuters. The world's second-largest oil consumer processed 58.03 million tonnes of crude in April, or about 14.12 million barrels per day, down 4.9% from March and 1.3% from a year earlier , official data showed.

The decline reflects broader disruptions across Asia. Chinese research firm Horizon Insight estimates China's throughput at 13.4 million barrels per day in the week to April 17, down from 15.4 million barrels per day in the week before the war started on February 28 . Indian crude runs fell nearly 13% to roughly 5.0 million barrels per day in April from February , said Rystad Energy analyst Nithin Prakash.

The IEA reported that in early April, shipments through the Strait remained severely restricted at around 3.8 million barrels per day, compared with more than 20 million barrels per day in February, with the overall loss in oil exports exceeding 13 million barrels per day . The cumulative supply losses reached more than 360 million barrels in March and 440 million barrels projected for April .

Will Europe's AI Boom Survive the Energy Crunch?

Europe's artificial intelligence ambitions are colliding with an energy crisis that threatens to derail the continent's competitiveness. 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 CBRE research.

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 , CNBC reported. Michael Brown, global investment strategist at Franklin Templeton, told CNBC that "the difference in the cost of energy around the world is going to become really quite extreme," adding "if I were making the next $7 billion data center, it would be in the U.S. or China" .

Prices for energy-intensive industries in Europe last year were on average roughly double in the U.S. and 50% higher than in China and India , according to the International Energy Agency. Data centers now consume 2% of the world's electricity, up from 1.7% in 2024 , according to the International Data Center Authority.

OpenAI said it was pausing its Stargate project in the U.K. partly because of the cost of energy , highlighting how the energy crisis is already forcing strategic decisions. The development creates clear winners and losers across Europe, with data center projects likely to migrate to parts of Europe with lower power costs .

Can European Refiners Prevent Jet Fuel Shortages?

Despite warnings from the IEA, European oil refiners and airlines expressed confidence they can avoid jet fuel shortages this summer. A Goldman Sachs research report estimates that Europe's commercial jet fuel inventories are slated to dip below the International Energy Agency's critical 23-day shortage threshold sometime in June , Fortune reported.

Claudio Galimberti, Rystad Energy chief economist, said European refineries have begun churning out higher percentages of jet fuel, with jet fuel inventories at the European benchmark of Amsterdam-Rotterdam-Antwerp down 50% since the start of the war at the end of February . Patrick Pouyanné, CEO of TotalEnergies, told investors the instruction to all European refineries is "max jet first," but cautioned that doesn't mean doubling jet fuel volumes—instead, a refinery's jet fuel output might grow from 10% to 13% .

About 20% of the continent's jet fuel came from the Gulf before the war, according to the IEA. U.S. refiners such as Valero and Marathon Petroleum have sought to maximize jet fuel production, with U.S. exports to Europe surging more than 400% to 94,000 barrels per day in April compared to February , according to Kpler data.

Jet fuel prices increased 103% by the end of March compared to the month prior , according to the International Air Transport Association. German carrier Lufthansa is cutting 20,000 short-haul flights through to October, which will save 40,000 metric tons of jet fuel .

How Much Has This Crisis Already Cost?

The oil and gas crunch caused by the war between the U.S., Israel, and Iran has cost global businesses $25 billion, Reuters reported, adding that the bill is going to climb higher still . The publication analyzed corporate statements issued after the war started, finding that as many as 279 companies had cited the war as a reason for defensive actions, including price hikes and production cuts to cushion the blow from soaring oil and gas prices .

Exxon Mobil CEO Darren Woods warned that the market has not absorbed the full impact of the unprecedented oil supply disruption, noting the disruption has been mitigated by loaded oil tankers that were in transit during the first month of the war, along with strategic petroleum reserves and commercial inventories . "It's obvious to most that if you look at the unprecedented disruption in the world supply of oil and natural gas, the market hasn't seen the full impact of that yet," Woods said, adding "there's more to come if the strait remains closed" .

Exxon warned that its production in the Middle East would decline by 750,000 barrels per day compared with 2025 if the strait remains closed through the second quarter, with about 15% of Exxon's total production impacted by the closure .

What Changed This Week

Oil markets entered a new phase of volatility as diplomatic efforts stalled and violence escalated. Brent crude broke through $111 per barrel following drone attacks on Gulf states, while China's refinery throughput hit multi-year lows as the world's largest crude importer grapples with supply disruptions. Europe's AI infrastructure buildout faces mounting pressure from energy costs that are double those in the U.S., threatening the continent's technological competitiveness. Meanwhile, refiners are racing to maximize jet fuel production ahead of summer travel season, though analysts warn shortages remain likely if the Strait of Hormuz stays closed.

What to Watch

The International Energy Agency warned this week that the oil market could remain severely undersupplied until October even if fighting ends next month . The IEA reported that crude and fuel flows through the Strait fell by around 4 million barrels per day in March and April . Last week's two-day summit between Trump and Chinese President Xi Jinping ended without any concrete progress toward reopening the Strait of Hormuz , according to Trading Economics. Watch for any breakthrough in U.S.-Iran negotiations, European jet fuel inventory data in early June, and China's May refinery throughput figures due in mid-June. The IEA's next monthly oil market report, expected in early June, will provide updated supply and demand forecasts.