Oil Rebounds, AI Hungers, China Tightens

$71.50/bbl per barrel. That's where West Texas Intermediate settled on Thursday, according to market data—up +0.63% after Switzerland confirmed that U.S.-Iran peace talks had been postponed. Brent crude climbed +0.51% to $75.20/bbl, erasing some of the week's earlier losses. The rebound came fast. Just days ago, traders had stripped nearly 9% off crude prices after the two countries signed a 14-point memorandum to reopen the Strait of Hormuz, OilPrice.com reported. Now the deal's durability is in question, and the geopolitical risk premium is creeping back in.

The whiplash reflects a deeper uncertainty: even if the framework holds, shipping through Hormuz is operating on political trust instead of commercial confidence. According to Windward, a maritime intelligence company cited by OilPrice.com, tanker traffic began to revive on June 18 in the hours immediately after the memorandum was signed. But insurers remain wary. Goldman Sachs expects Gulf exports to normalize by the end of next month—but only to 70% of pre-war levels, the bank's analysts noted. Iraq is already rerouting crude and naphtha exports through Syria to bypass the strait entirely, Reuters reported.

Can the Grid Keep Up With AI's Appetite?

While oil markets swing on diplomacy, a quieter crisis is building in the electricity sector. Data centers accounted for around 1.5% of the world's electricity consumption in 2024, or 415 terawatt-hours , the International Energy Agency reported. By 2035, the range of data center electricity demand across IEA scenarios spans from 700 to 1,700 TWh —roughly the difference between powering Japan or powering Japan and Germany combined.

Europe is betting on nuclear to close the gap. In Europe, renewables and nuclear are set to supply most of the additional electricity required, with their combined share rising to 85% by 2030 , according to the IEA. That's not wishful thinking—it's necessity. France has a "huge advantage" when it comes to lower electricity prices, as it's a leader in European nuclear energy , a researcher told CNBC in May. Germany's SGB-SMIT, a grid equipment maker, is in early talks for an IPO that could value the company above €4 billion, the Financial Times reported Thursday. Investors are focused on the AI and data center boom.

But the buildout isn't fast enough. NERC warns of elevated summer shortfall risk starting 2026. Adding tens of GW of data center load to grids sized for slow residential growth creates real blackout risk during extreme heat events , according to analysis published in February. Natural gas is filling the gap in the meantime. Natural gas expands by 175 TWh to meet growing data center demand, notably in the United States , the IEA projected.

What's Indium, and Why Does It Matter?

China is stepping up scrutiny over exports of indium, leading some buyers to fear the niche metal, sought after for next-generation data centers, may be added to the export control regime , Reuters reported Thursday. China produces nearly 70% of the world's indium, a byproduct of zinc refining mostly used in displays and solder but also the raw material for making indium phosphide, used to make high-speed optical chips for AI data centers .

Beijing put indium phosphide on an export control list in February 2025 and the restrictions have become enough of a hurdle for next-generation data centers that the CEO of Nvidia-backed chipmaker Coherent traveled to Beijing with President Donald Trump in May to raise the issue . Now China is tightening checks on the raw material itself. While indium metal is not on the export control list, two buyers told Reuters about growing scrutiny over their purchases from Chinese customs .

The U.S. Defense Logistics Agency has already moved to stockpile the material. Indium has been identified as a potential vulnerability for the U.S., whose Defense Logistics Agency earlier this year released a request for proposals to stockpile up to 403 tons of the material over three years . For hyperscalers racing to expand AI capacity, delays in optical interconnects can slow the deployment of new clusters and push up costs across the next wave of data centers, industry analysts noted.

California's Solar Surge Crushes Gas

On the opposite end of the energy spectrum, California just crossed a threshold that seemed distant even two years ago. Solar electricity generation in the California Independent System Operator (CAISO) over the first five months of 2026 increased 21% compared with the same period in 2024, and natural gas generation decreased by 60% , the U.S. Energy Information Administration reported Tuesday.

The shift wasn't marginal. In CAISO, utility-scale solar generated more electricity than natural gas on a daily basis on 82% of days in the first five months of 2026, up from 21% in 2024 and 2025 . Battery storage is the enabler. From April 2024 to April 2026, utility-scale solar capacity increased 19% to 25 gigawatts, and net battery storage capacity increased 79% to 16 GW . In the first five months of 2026, battery storage discharge tripled compared with the same period in 2024 , the EIA noted.

Natural gas capacity in CAISO has remained flat at 29 GW, but utilization has collapsed as solar and batteries take over midday and evening load. Henry Hub natural gas prices fell -2.40% to $3.25/MMBtu per MMBtu on Thursday, according to market data, pressured by softer power demand heading into the Juneteenth holiday weekend.

India Expands Oil Buffers After Supply Shock

India's government has asked state-owned Oil and Natural Gas Corp (ONGC) to build and fill a new site for strategic petroleum reserves, with an estimated investment of $1.6 billion , the Economic Times reported Friday. The government is looking to boost India's energy security in the wake of the Iran war and the following oil supply crisis that India felt firsthand, with a soaring energy import bill and rising prices of fuels .

Currently, India's underground Strategic Petroleum Reserve storage has a total capacity of 5.33 million metric tons of crude oil, equal to only 39 million barrels of crude oil, or eight days' worth of India's oil consumption . The new site will be at Mangaluru with a proposed capacity of 1.75 million metric tons. The new underground cavern would raise India's total oil storage capacity by one third , according to sources cited by the Economic Times.

The move marks a shift in how India finances energy security infrastructure. Unlike previous reserves funded by the government, ONGC is expected to both build and fill the facility using its own balance sheet. India also received its first post-deal LNG cargo through the Strait of Hormuz on Friday, OilPrice.com reported—a tanker flying the flag of Malta that safely anchored at the Petronet LNG jetty in Dahej.

What Changed This Week

Oil prices swung violently on diplomacy, falling nearly 9% after the U.S.-Iran framework agreement was announced, then rebounding as the talks were postponed. Tanker traffic through Hormuz resumed tentatively, but insurers and shippers are waiting for commercial confidence to replace political promises. California's solar-plus-storage buildout crossed a symbolic threshold, with utility-scale solar outpacing natural gas on most days for the first time. And China tightened scrutiny on indium exports, adding another layer of supply chain risk to the AI infrastructure race.

What to Watch

The next milestone for Hormuz is June 30—the end of the 60-day toll-free passage window outlined in the U.S.-Iran agreement. Whether shipping normalizes or stalls will determine if crude prices stabilize or spike again. On the power front, watch for NERC's summer reliability assessment and any grid alerts in regions with heavy data center load. China's indium export policies will be closely monitored by chipmakers and defense planners alike. And in California, the EIA will release June generation data in mid-July, showing whether the solar-gas crossover holds through peak summer demand.