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CRUDE oil prices climbed more than four per cent on Monday as markets reacted to reports that Iran had halted indirect talks with the United States and was considering measures that could severely disrupt some of the world's most critical energy shipping routes.
The rally was driven by growing fears that Tehran and its regional allies could move to block the Strait of Hormuz, a strategic chokepoint through which a substantial share of global oil and liquefied natural gas exports pass each day.
Brent crude settled at US$94.98 per barrel, rising US$3.86 or 4.2 per cent, while US West Texas Intermediate crude finished at US$92.16 per barrel, gaining US$4.80 or 5.5 per cent.
Both benchmarks had surged by more than six per cent earlier in the trading session before surrendering part of those gains after US President Donald Trump disputed reports that negotiations had been suspended and revealed he had also communicated with Hezbollah through intermediaries.
Reuters reported Trump saying that he had secured assurances from the Iran-backed Lebanese group that it would refrain from launching attacks against Israel, easing some immediate concerns about a broader regional escalation.
Nevertheless, traders remained focused on the potential threat to maritime transport routes after Iran's Tasnim news agency reported that Tehran and the so-called "Resistance Front" had agreed on measures aimed at "punishing" Israel and its supporters.
According to the report, plans under consideration include a complete closure of the Strait of Hormuz and the activation of pressure points across other strategic waterways, including the Bab el-Mandeb Strait at the southern entrance to the Red Sea.
The Bab el-Mandeb represents another critical artery for global energy flows, with Saudi Arabia currently transporting between four million and six million barrels of oil per day through the corridor.
Robert Yawger, Executive Director at Mizuho, highlighted the significance of any disruption to the route in a market already grappling with geopolitical uncertainty.
Market participants were struck by the starkly different narratives emerging from Washington and Tehran.
"It just seems that both sides are in different worlds," said Andrew Lipow, President of Lipow Oil Associates.
Analysts warned that prolonged instability could rapidly tighten global supply balances, particularly if shipping through Hormuz remains constrained.
"The longer the conflict continues, the lower commercial inventories will get ... at which time prices spike. We are only a month or two away from that," Lipow said.
The latest developments have cast fresh doubt on expectations that the regional crisis could be resolved quickly. Concerns over the security of Hormuz have intensified following reports that Iran may have expanded defensive mining activities in the waterway, further raising the risks facing commercial shipping.
Shipping executives attending an industry gathering in Athens said any future peace agreement would need to establish clear and enforceable operating rules before vessel operators could confidently resume normal transit through the strait.
Beyond geopolitical concerns, markets are also contending with signs of weakening global demand.
Recent economic data from China indicated factory activity remains sluggish, reinforcing concerns that the world's second-largest economy is losing momentum and may consume less fuel than previously expected.
Reflecting those concerns, Goldman Sachs warned that softer demand in China and Europe presents a significant downside risk to its fourth-quarter forecasts of US$90 per barrel for Brent crude and US$83 per barrel for WTI, although supply disruptions in the Middle East could still propel prices substantially higher.
Elsewhere, a Reuters survey suggested Saudi Arabia is likely to reduce its official selling prices for Asian buyers in July for a second consecutive month, reflecting softer regional demand conditions.
Russia is reportedly considering measures to secure domestic fuel supplies, including increased imports from Belarus and stricter controls on exports of petrol and diesel. According to Russian media reports, officials are also discussing a temporary two-month ban on petrol exports.
In the United States, analysts expect crude inventories to have fallen by approximately 3.6 million barrels during the week ended May 29, extending the previous week's decline and providing additional support for prices.
Meanwhile, Kazakhstan said oil production had returned to 290,000 metric tonnes per day following earlier disruptions at the Tengiz oilfield, while Venezuela recorded a third consecutive monthly increase in exports, reaching 1.25 million barrels per day in May amid stronger shipments to the United States, India and Europe.
Despite those supply increases, investors remain overwhelmingly focused on the possibility that any escalation involving Iran could outweigh additional production elsewhere, leaving energy markets vulnerable to further sharp price swings in the weeks ahead. - June 2, 2026
