Key Takeaways:
Global oil prices surged over 6 percent after the White House proposed a new international coalition to restore freedom of navigation in the Strait of Hormuz, where a U.S. blockade and Iranian counter-moves have stalled traffic.
"If Trump is prepared to extend the blockade, supply disruptions would worsen further and continue to push oil prices higher," Yang An, an analyst at Haitong Futures, said in a note.
Brent crude futures for June settled up $6.77, or 6.1 percent, at $118.03 a barrel, the highest since March 31. U.S. West Texas Intermediate futures rose $6.95, or 7 percent, to $106.88 a barrel, as a U.S. blockade on Iranian ports continues to disrupt the vital shipping lane.
The proposal for a "Maritime Freedom Construct" aims to bring collective action to bear on the crisis, which has stranded roughly 20,000 seafarers and choked off a significant portion of global energy supply. The success or failure of the coalition will likely determine whether crude prices stabilize or continue their climb toward multi-year highs.
The effort was detailed in a State Department cable asking U.S. diplomats to press foreign governments to join the coalition, which would share information, coordinate diplomatically, and enforce sanctions. The move comes as President Trump on Monday told aides to prepare for an extended blockade that could remain in place until Iran agrees to terms on its nuclear program.
The escalating crisis has triggered a severe humanitarian issue, with up to 20,000 seafarers on 2,000 vessels stranded in and around the strait, according to the United Nations’ International Maritime Organization. These crews face dwindling food and water supplies and the constant psychological stress of operating in a quasi-combat zone.
The situation echoes the crisis during the COVID pandemic, where hundreds of thousands of seafarers were stranded at sea. Many are working on expired contracts, facing financial insecurity and the risk of abandonment by shipowners, a problem that has been growing in recent years, particularly among vessels in the "shadow fleet" carrying sanctioned goods.
Adding to price pressures, U.S. government data showed domestic crude inventories fell by more than 6 million barrels last week, far exceeding analyst estimates. The drawdown, coupled with the UAE's recent decision to quit OPEC, has tightened the global supply outlook just as the northern hemisphere enters its peak summer driving season.
While the UAE's exit from the oil cartel is not expected to have a major near-term market impact, analysts at Wood Mackenzie suggest it increases the risk of oversupply and weaker prices from 2027 onward. For now, however, the market remains squarely focused on the immediate supply disruptions in the Persian Gulf.
This article is for informational purposes only and does not constitute investment advice.
