Oil Markets Swing on Hormuz Tensions as Peace Talks Inch Forward

U.S. forces fired on and disabled two Iranian oil tankers Friday after what Central Command described as attempts to violate the American naval blockade , escalating tensions even as the White House said it was getting close to an agreement with Iran on a one-page memorandum of understanding to end the war, with Iranian responses expected within 48 hours .

The statement named the "unladen oil tankers" as the M/T Sea Star III and M/T Sevda , according to CBS News. U.S. forces fired on and disabled two Iranian oil tankers on Friday after exchanging fire with Iranian forces in the Strait of Hormuz overnight , NPR reported. The strikes came as WTI crude futures rose above $95 per barrel on Friday, recouping some losses from earlier in the week as fresh clashes between the US and Iran threatened to derail diplomatic efforts to end the conflict , according to Trading Economics. Per market data, WTI Crude traded at $71.50/bbl on Friday, up 0.6%, while Brent Crude stood at $75.20/bbl, up 0.5%.

The military action occurred despite what appeared to be progress in negotiations. A one-page, 14-point memorandum of understanding is being negotiated between Trump's envoys and Iranian officials that would declare an end to the war and start a 30-day period of negotiations on a detailed agreement to open the strait, limit Iran's nuclear program and lift U.S. sanctions , Axios reported Tuesday.

LNG Carriers Test the Blockade

Shipping traffic through the Strait of Hormuz has been largely blocked by Iran since 28 February 2026, when the United States and Israel launched an air war against Iran, and the Iranian Revolutionary Guard Corps issued warnings forbidding passage through the strait, boarded and attacked merchant ships, and laid sea mines. Since 13 April, the US has simultaneously blockaded Iranian ports , according to reports.

The Financial Times reported that until the US–Israeli war against Iran, about 25% of the world's seaborne oil trade and 20% of the world's liquefied natural gas (LNG) passed through the strait. Just 191 vessels crossed in the entire month of April , CNN reported, citing Kpler data—down from about 3,000 vessels typically passing through the Strait of Hormuz each month before the conflict.

The chairman of the Joint Chiefs of Staff, Gen. Dan Caine, said Tuesday that 22,500 mariners were trapped in the strait on more than 1,550 commercial vessels , NBC News reported. Analysis by Lloyd's List Intelligence showed Wednesday that transit volumes had dropped from 44 to 36 passages over the past week .

Oil Spill Detected Near Iran's Main Export Hub

A suspected oil spill covering dozens of square kilometres of sea near Iran's main oil hub of Kharg Island has been seen on satellite imagery this week, with pictures from Copernicus's Sentinel-1, Sentinel-2 and Sentinel-3 satellites showing a grey and white slick covering waters to the west of the 8-kilometre long island on May 6-8 , Reuters reported.

Leon Moreland, researcher at the Conflict and Environment Observatory, estimated the slick was covering an area of approximately 45 square km , and Louis Goddard, co-founder of consultancy Data Desk, said it was potentially the largest to occur since the start of the U.S.-Israel war against Iran 70 days ago . The cause of the possible spill and the point of origin are currently unknown, and Kharg Island is the hub for 90% of Iran's oil exports, much of which is bound for China .

China's Energy Imports Plunge

China's seaborne crude imports fell to 8.03 million barrels per day in April, the lowest since July 2022, and the disruption in the Middle East has led China to tightly manage exports of refined products, driving refined oil product exports for April down to their lowest in roughly a decade at 3.1 million tonnes , according to ship-tracking firm Kpler data cited by Dawn.

Despite the supply shock, China has remained comparatively insulated amid the historic disruption of global oil markets, even clocking robust growth in the first quarter of 2026 , CNN reported. Some 38% of oil and 23% of liquified natural gas typically passing through the strait are bound for Chinese ports, accounting for about half of China's supply of imported oil and a sixth of its natural gas , according to financial firm Nomura.

Major oil and gas producer Russia has seen a windfall from the Iran war as Middle East energy supplies have been impacted, with 90% of Russia's total exports of crude delivered to China and India in the first quarter of 2026 , CNBC reported.

Natural Gas Markets Navigate Shoulder Season

In U.S. natural gas markets, June New York Mercantile Exchange natural gas futures finished slightly higher on the week despite slipping in the final session after rallying earlier to an intraday high of $2.845/MMBtu , Natural Gas Intel reported. According to market data, Henry Hub Natural Gas traded at $3.25/MMBtu on Friday, down 2.4%.

Changes in spot natural gas prices for Saturday-Monday delivery were mostly modest outside of West Texas, where prices plunged amid strong production, weaker LNG demand tied to maintenance and soft shoulder season weather , Natural Gas Intel reported. The publication noted that natural gas bulls are looking to LNG risks for support as the shoulder season drags on.

Meanwhile, the total number of active drilling rigs for oil and gas in the United States rose this week to 548, down 30 from this same time last year, with the number of active oil rigs rising by 2 to 410 , according to Baker Hughes data cited by OilPrice.com.