Oil Hits 3% as Hormuz Stays Shut, World Bank Warns 24% Energy Price Rise
Synopsis
Oil prices closed up nearly 3 per cent on Tuesday, with Brent crude reaching US$111.26 and WTI briefly crossing US$100 a barrel, its seventh consecutive day of gains. US-Iran peace talks have collapsed and the Strait of Hormuz remains effectively closed, carrying away 20 per cent of the world's oil supply. The World Bank warned global energy prices could rise 24 per cent in 2026 to their highest level since Russia's invasion of Ukraine. The UAE also announced it is leaving Opec+ on May 1, but the supply impact is being absorbed by the Hormuz shutdown.
Oil rose almost 3% closing Tuesday for the seventh consecutive day of gains. Iran peace talks have failed, the Strait of Hormuz is shut and now the World Bank warns energy prices could reach their highest.
Key Highlights
- Oil prices rose on Wednesday, with the international benchmark.
- Brent crude closed at US$111.26 a barrel, up 2.8 per cent for its seventh straight day of gain.
- WTI hit US$100 a barrel for at least a few hours for the first time since April 13.
- Global energy prices could rise by 24% in 2026.
- The UAE, the bloc’s fourth-largest producer, confirmed it will quit Opec+ on May 1
Shutdown of Hormuz Shows No Sign of Lifting as Oil Holds Gains
Oil markets have now had seven straight days of trading after the prolonged shutdown of the Strait of Hormuz, which carries about 20% of global crude and gas. Brent crude ended Tuesday at $111.26 a barrel, up from $3.03 on the day before.
West Texas Intermediate touched $100 a barrel for the first time since early January, but ended the day lower at $99.93. Last week, face-to-face US-Iran peace talks ended without success, and on Monday a US official confirmed that Trump was unhappy with the latest Iranian offer, leaving the conflict intractably frozen with no prospects for resolution.
What The UK Needs To Do To Push Back
In one of the most potentially market-moving developments, the UAE, Opec+‘s fourth-largest producer, announced on Tuesday it will exit the group on May 1. Again Capital analyst John Kilduff said in regular circumstances it would have sparked a large sell off, placing the potential amount that could be quickly added from direct UAE output at between 1-1.5 million barrels per day. But with the Strait of Hormuz practically completely blocked, there is really nowhere for that supply to go. The supply squeeze created by the conflict has absorbed almost all of the bearish impact from the UAE’s departure, with nowhere near enough spare barrels available to bring on.
World Bank Sounds Alarm, and What It Means for Aussie Households
Global energy prices could go up 24% in 2026, according to the World Bank’s latest commodity forecast report released on Tuesday, returning to their pre-war level. Its baseline predicts shipping through the Strait of Hormuz resumes gradually in October, but it cautioned that risks are “decidedly weighted” towards elevated prices if the repair takes longer.
Oil at ports and anchored tankers across the globe climbed to 153.11 million barrels on April 24, up an astonishing 25% week-on-week as ships drift, waiting for a solution to all this mess. A further 24% increase in global energy prices would push domestic fuel and power bills even higher over the course of 2026 for Australian households already paying almost $3 per litre for diesel.
FAQs
- What did the UAE do and why does this matter?
UAE ended its Opec+ deal on May 1, and could add 1.5 million barrels a day to the market, but because of Hormuz it cannot find customers for its oil easily.
- How high could oil prices go?
Energy prices globally could reach their highest level since Russia’s invasion of Ukraine in 2022, with a projected increase of 24 per cent by 2026, according to the World Bank.
- How will this affect Australians?
All of Australia’s refined fuel comes through supply chains disrupted by the Hormuz closure. That will take the price of petrol and diesel even more than they already are, with a 24 per cent increase in world energy costs.
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