Oil Markets Surge as Hormuz Crisis Drags On

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 , reflecting sustained global supply concerns as diplomatic efforts to reopen the critical waterway continue to stall.

The price surge marks a dramatic shift from earlier forecasts. According to market data, WTI traded at $71.50 per barrel as of Friday's close, while Brent settled at $75.20 per barrel—though these figures reflect different contract months than the front-month futures that spiked above $100. The EIA assessed that Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain collectively shut in 10.5 million barrels per day of crude oil production in April , creating an unprecedented supply shock.

More than ten weeks after the war in the Middle East began, mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace, with cumulative supply losses from Gulf producers already exceeding 1 billion barrels and more than 14 mb/d of oil now shut in , according to the IEA's May Oil Market Report.

Can Alternative Routes Fill the Gap?

The answer is a qualified no—at least not fully. Only Saudi Arabia and the UAE have operational crude pipelines that could potentially re-route flows to bypass the Strait of Hormuz, with an estimated 3.5 to 5.5 mb/d of available capacity , the IEA notes. That's a fraction of the roughly 20 million barrels per day that normally transit the strait.

The UAE announced Friday it will accelerate construction of a second West-East oil pipeline expected to come online in 2027, which will double the Abu Dhabi National Oil Company's export capacity through Fujairah , according to CNBC. The existing Abu Dhabi Crude Oil Pipeline can carry up to 1.8 million barrels , meaning the new pipeline would add similar capacity.

Atlantic Basin crude oil exports, now heading primarily to hard-hit East of Suez markets, have increased by 3.5 mb/d since February, with notable gains from the United States, Brazil, Canada, Kazakhstan and Venezuela , the IEA reported. Supply growth expectations from the Americas have been revised up by more than 600 kb/d since the start of the year, to 1.5 mb/d on average .

Will North America's LNG Boom Continue?

Absolutely. Houston-based Caturus announced a final investment decision for its Commonwealth LNG project on May 15, securing $9.75 billion in project financing for construction of a 9.5 million tonnes per annum liquefied natural gas export facility in Cameron Parish, Louisiana , Reuters reported.

The transaction garnered strong interest from both equity and debt investors, resulting in total commitments of $21.25 billion , according to the company's announcement. Canada Pension Plan Investment Board will contribute $1.2 billion in financing to increase its total stake in the Caturus platform to 31% , while Mubadala Energy, an arm of one of Abu Dhabi's sovereign wealth funds, holds a 24.1% stake in Caturus .

Phase 1 development is expected to generate more than $3 billion in annual export revenue when operations commence in 2030 , the company stated. Long-term offtake agreements have been secured with a diversified group of global energy and industrial counterparties, including EQT, Glencore, Mercuria, PETRONAS and Aramco Trading .

The timing couldn't be better. Global LNG prices remain elevated as a result of reduced flows through the Strait of Hormuz, with a wide spread between U.S. domestic natural gas prices and international markets , according to the EIA's May Short-Term Energy Outlook.

Can Canada Finally Build Another Pipeline?

Maybe—but it's complicated. The federal and Alberta governments advanced a climate and energy agreement on May 15 that could see construction on an oil pipeline to the West Coast start as early as September 2027 , CBC News reported.

Prime Minister Mark Carney is throwing his support behind a new oil pipeline, with a goal of putting shovels in the ground by the fall of 2027, as part of a deal that will see Alberta fall in line on a weakened industrial carbon price. Alberta committed to submit its pipeline application to the Major Projects Office by July 1, and by Oct. 1, the federal government aims to designate it a "project of national interest" , according to Canada's National Observer.

The Financial Times reported that the carbon tax deal lays the groundwork for increased oil and gas production and shipping of fossil fuels to Asia. Prime Minister Mark Carney and Alberta Premier Danielle Smith agreed to raise Alberta's emission price to $130 per tonne by 2040 while aligning on a timeline for building a new pipeline to the West Coast, down from the previous national emission price target of $170 per tonne by 2030 , CBC reported.

But there's fierce opposition. BC Premier David Eby shared strong words about the agreement, stating "As a country, it's time to stop rewarding bad behaviour. It cannot be the case that the projects that get prioritized in Canada are those where a Premier threatens to leave the country" , according to Canada's National Observer. There is no private sector proponent yet for the pipeline, with Alberta saying it would act as the proponent for the purpose of the application to the Major Projects Office .

Natural Gas Finds Its Footing

After months of weakness, natural gas markets are showing signs of life. According to market data, Henry Hub Natural Gas traded at $3.25/MMBtu on Friday, down 2.4% on the day but up from recent lows. Natural Gas Intel reported that June NYMEX natural gas futures settled higher Friday and posted weekly gains as warmer weather forecasts lifted expectations for stronger cooling demand.

Marketed natural gas production in the Lower 48 averaged 117.2 billion cubic feet per day in the first quarter of 2026, a 4% increase compared with the same period in 2025 , according to the EIA. The Permian region is expected to produce 29.2 Bcf/d in 2026, or 6% more than in 2025 .

But the Permian faces challenges. The region faces severe pipeline constraints, as evidenced by record-low Waha Hub spot prices, which have averaged below zero for eight of the last nine months , the EIA noted. Natural Gas Intel reported that the ECA LNG facility is nearing startup in Mexico, which should help alleviate some of these constraints and boost the Permian outlook.

Meanwhile, Reuters sources said BP plans to cut its pipeline gas trading team as LNG focus grows, reflecting a broader industry shift toward liquefied natural gas exports .

What Changed This Week

Oil markets posted their strongest weekly gains in months as hopes for a diplomatic resolution to the Hormuz crisis faded and supply disruptions persisted. The UAE moved aggressively to expand its bypass capacity with a second pipeline to Fujairah, while Canada took concrete steps toward approving a new West Coast oil pipeline despite environmental opposition. The Caturus LNG project's $9.75 billion financing close demonstrated continued investor appetite for U.S. natural gas export infrastructure, even as domestic gas prices remain subdued due to pipeline constraints in key producing regions.

What to Watch

The IEA warned that the oil market could remain severely undersupplied through October even if the Hormuz conflict is resolved next month, making any diplomatic developments critical for price direction. Alberta's July 1 deadline to submit its pipeline proposal to Canada's Major Projects Office will be the next major milestone for that project, with federal designation expected by October 1—just weeks before Alberta's scheduled October 19 referendum that may include a separation question. For natural gas, the startup timing of the ECA LNG facility in Mexico will be crucial for relieving Permian pipeline constraints, while the Commonwealth LNG project's 2030 target date positions it to capture growing Asian demand for U.S. gas exports. The EIA's next Short-Term Energy Outlook, due May 20, should provide updated production forecasts reflecting the ongoing Hormuz disruption.