Oil Markets Whipsaw as Iran Conflict Keeps Strait of Hormuz Choked

Oil prices edged lower on Thursday, with Brent crude futures falling about 1% to close at $100.06 a barrel and U.S. West Texas Intermediate futures ticking 0.28% lower to settle at $94.81 per barrel , according to CNBC. But according to market data, oil was down about 5% earlier in the session on hopes that the U.S. and Iran would strike a deal, before prices turned higher after a senior Iranian official appeared to rebuff the U.S. proposal .

Brent crude has surged more than 55% since the Iran war began, hitting nearly $120 a barrel at its peak, with Brent jumping from around $72 a barrel on February 27 to nearly $120 at its peak , OilPrice.com reported. The volatility reflects just how sensitive markets remain to any hint of progress—or setback—in efforts to reopen the Strait of Hormuz, which has been largely blocked since late February.

Europe's Inventory Problem Goes Beyond Price

While headlines focus on oil prices, global observed oil inventories fell by 85 mb in March, with stocks outside of the Middle East Gulf drawn down by a significant 205 mb (-6.6 mb/d) as flows through the Strait of Hormuz were choked off , according to the International Energy Agency's April report. The Financial Times noted that low stocks of crude and products in Europe are bigger risks for the continent than price alone.

The 400 million barrels of oil released by the International Energy Agency could last about five months, with reserves being released at a pace of around 2.5 million barrels per day, so it will take about 160 days , Homayoun Falakshahi, senior energy analyst at Kpler, told Euronews. EU storage currently holds 270 million barrels of crude oil, according to Kpler, roughly enough for three weeks of consumption .

Chevron CEO Mike Wirth warned that "we will start to see physical shortages," adding that "demand needs to move to meet supply" and "economies are going to have to slow," with Asian economies the first to feel the impact of oil shortages on their economic growth, followed by European economies , according to OilPrice.com.

Natural Gas Storage Surprises as Demand Softens

In a rare bright spot, U.S. natural gas markets showed unexpected strength in storage data. Working gas in storage was 2,205 Bcf as of Friday, May 1, 2026, according to EIA estimates, representing a net increase of 63 Bcf from the previous week, with stocks 75 Bcf higher than last year at this time and 139 Bcf above the five-year average of 2,066 Bcf .

Natural Gas Intel reported that natural gas futures traded in a narrow band near even early on Friday, as traders weighed Thursday's bullish storage surprise against sluggish overall demand typical for this time of year. According to market data, Henry Hub Natural Gas traded at $3.25/MMBtu, down 2.4%.

India Braces for Inflation Acceleration

Inflation in India, the world's third-biggest crude oil importer, accelerated in April as the higher global oil and gas prices started to feed through consumer prices, with the annual consumer price index (CPI) expected to have jumped to 3.8% in April, up from 3.4% in March, a Reuters poll of 46 economists showed , OilPrice.com reported.

Indian companies raised prices of LPG, widely used as a cooking fuel in households, in March after the West Asia conflict disrupted energy supplies, an effect economists said likely carried into April , according to Business Standard. Crude oil prices, still about 40 per cent above pre-war levels, threaten to reverse that benign trend in the world's third-largest oil importer .

The IMF's Krishna Srinivasan told reporters that India has policy room to manage the global energy shock, supported by stable inflation and fiscal measures like excise tax cuts , though the closure of the Strait of Hormuz poses a dominant risk, with severe scenarios potentially pushing oil prices above $120 .

The Long Road to Normal

Even if diplomatic efforts succeed, the path back to normal operations will be measured in months, not weeks. Even in a best-case scenario, restoring production will take months, with full normalization potentially delayed until late 2026, and chances are the supply disruption will last a while, with Rystad Energy's head of geopolitical analysis telling the Financial Times that "even if there is a durable ceasefire tomorrow and the strait reopens, markets will not return to normal for at least six months" , OilPrice.com reported.

Global oil demand is estimated to contract by 800 kb/d year-on-year in March and by 2.3 mb/d in April, with global oil demand now projected to decline by 80 kb/d on average in 2026, compared to growth of 730 kb/d expected in last month's Report , according to the IEA.

Since the war began, traffic has been reduced to a trickle, with just 191 vessels recorded crossing in the entire month of April , CNN reported, citing Kpler data. Overall, traffic through Hormuz in the last two months has run at about 5% of the pre-war average, leading to shortages of refined products, especially in Asia .

The energy shock has moved beyond a pricing problem to a fundamental supply crisis that's reshaping global trade flows and forcing countries to confront the fragility of energy security in an interconnected world.