In a statement sent to Rigzone on Tuesday, Naeem Aslam, CIO at Zaye Capital Markets (ZCM), outlined that ZCM sees oil being pulled in two directions.
“We see crude being pulled between geopolitical risk and demand uncertainty,” Aslam said in the statement.
“Prices ease when President Trump signals that Iran negotiations are moving ahead, because traders begin pricing the possibility of lower regional tension, smoother shipping flows, and reduced supply disruption risk,” he highlighted.
“However, oil rises again when uncertainty around Iran, the Strait of Hormuz, or Middle East security returns,” he added.
In the statement, Aslam pointed out that oil is not moving in a straight line, noting that it is trading on headlines, shipping risk, inflation fears, and whether markets believe any Iran deal can genuinely restore stable energy flows.
Aslam went on to highlight in the statement that the broader supply picture also supports price volatility.
“The IEA [International Energy Agency] said global oil supply fell by a further 1.8 million barrels per day in April to 95.1 million barrels per day, while output from Gulf countries affected by the Strait disruption was 14.4 million barrels per day below pre-war levels,” Aslam said.
“OPEC’s latest demand view still points to 2026 oil demand growth of 1.17 million barrels per day, but that was revised down from 1.38 million barrels per day. This mix shows the oil market is tight on supply, but no longer fully confident on demand,” he added.
“High prices can support producers, but they can also hurt consumers, airlines, transport firms, and energy sensitive economies,” he warned.
Aslam also noted that other data from Monday “adds another layer”.
“The May inflation nowcast showed headline CPI projected at 4.18 percent year over year, with core CPI at 2.82 percent, while the Kansas City services index rose to 10 from 3 and its employment component improved to 5 from -5,” he said.
Aslam went on to note that today’s USD CB Consumer Confidence “is the next trigger, with the previous reading at 92.8 and the forecast at 91.9”.
“A higher reading could support oil through stronger travel, driving, retail transport, and services demand. A lower reading would raise demand risk concerns and pressure crude,” he said.
“The key signal is clear: Iran and Hormuz risk support oil, but weak confidence and high fuel costs can cap the rally,” he noted.
In an analysis posted on Saxo Bank’s website on Friday, Ole Hansen, Saxo Bank’s Head of Commodity Strategy, highlighted that Brent crude fell from above $112 per barrel on May 18 towards $102 on May 21 “as renewed hopes for a U.S.-Iran agreement briefly encouraged traders to price a higher probability of additional supply returning to the market”.
Hansen went on to outline that, by May 22, oil prices had “rebounded towards $105” after the “prospects for a near-term breakthrough” were “complicated”.
He highlighted that oil has effectively become the market’s macro thermostat, “driving inflation expectations and influencing bond yields, currencies and broader risk appetite”.
In the analysis, Hansen noted that many investors continue to ask why oil prices are not significantly higher “considering the magnitude of disruptions associated with the Strait of Hormuz”.
Offering some insight into the price trend, Hansen said several mitigating factors continue to soften the immediate impact.
“These include strategic reserve releases, rerouted exports through pipelines from Saudi Arabia and the UAE, rising U.S. exports of crude and refined products, and China temporarily reducing imports while drawing on domestic reserves,” he said.
“In addition, and increasingly important, high prices have begun to trigger demand destruction through lower refinery intake, government measures aimed at reducing consumption, and shifts in consumer behavior,” he added.
“Together with the market’s continued belief in an eventual diplomatic solution, these factors have helped cap prices,” he continued.
Hansen warned, however, that “the onset of peak summer fuel demand, combined with ongoing disruptions and depleted global stockpiles, could according to the IEA push the oil market into the ‘red zone’ during July and August”.
Hansen also added that a reopening of the Strait “could initially trigger a bearish reaction as stranded cargoes begin moving simultaneously, releasing large volumes of crude and refined products into the market”.
He noted, however, that “relief may prove temporary given the need to rebuild commercial inventories, strategic reserves and supply chains that have been heavily depleted during the crisis”.
“Once trade normalization begins, inventory rebuilding could create renewed price support as buyers compete for barrels needed to restore stock levels,” he said.
“In other words, reopening Hormuz may not end market stress; it may simply shift it into a different phase, potentially lifting the pre-war Brent price floor by $10-15 and supporting revenues and investment across the energy sector,” he continued.
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