Oil Price Today (May 18): Crude oil above $110 again as Iran war tensions deepen. Where is liquid gold headed?

Oil prices extended gains on Monday as hopes of ending the U.S.-Israeli conflict with Iran appeared to fade after a nuclear power plant in the United Arab Emirates came under attack, while U.S. President Donald Trump was expected to review military options on Iran.

Fresh drone attacks targeting the UAE and Saudi Arabia, along with increasingly aggressive rhetoric from Washington and Tehran, added to fears of a wider escalation. UAE officials said they were investigating the source of the strike on the Barakah nuclear power plant and stressed that the UAE reserved the right to respond to what it described as “terrorist attacks.”

Crude oil price on May 18

Brent crude futures rose $1.44, or 1.32%, to $110.70 a barrel by 2337 GMT after earlier touching their highest level since May 5. U.S. West Texas Intermediate crude climbed $1.84, or 1.75%, to $107.26 a barrel, after hitting its strongest level since May 4. Both benchmarks had already surged more than 7% last week as expectations of a peace deal weakened and attacks and seizures around the Strait of Hormuz continued. Trump is also expected to meet senior national security advisers on Tuesday to discuss possible military action related to Iran, according to an Axios report.

Iranian Foreign Minister Abbas Araqchi said on Friday that Tehran has “no trust” in the United States and would only return to negotiations if Washington demonstrated seriousness. He added that Iran remained prepared for both renewed conflict and diplomatic engagement.

Trump, meanwhile, said he was running out of patience with Iran and had agreed with Xi Jinping that Tehran must not be allowed to develop a nuclear weapon and should reopen the Strait of Hormuz. Nearly one-fifth of global oil and liquefied natural gas shipments pass through the strait, which is the key export route for producers such as Saudi Arabia, Iraq and Qatar.

Tensions between Washington and Tehran have again intensified, and although the ceasefire technically remains in place, hopes for a quick reopening of Hormuz have diminished sharply.

What’s next?

Analysts at Morgan Stanley described the oil market as being in “a race against time,” warning that the factors preventing a sharper spike in crude prices could weaken if the Strait of Hormuz remains shut into June.

Despite disruptions affecting almost 1 billion barrels of oil supply, crude prices are still below the peaks seen in 2022 following Russia’s invasion of Ukraine. Analysts led by Martijn Rats said the market entered the current crisis with stronger supply buffers, while investors still largely expect the strait to reopen eventually.

Morgan Stanley also noted that increased U.S. crude exports and weaker Chinese imports have so far cushioned the market from a more severe supply shock. However, the brokerage warned that an extended closure of Hormuz could tighten global supplies again if disruptions continue beyond what China or the United States can comfortably absorb.

Haitong Futures said markets remain wary and cautioned that the ceasefire could prove temporary. The brokerage added that stalled negotiations between Washington and Tehran risk triggering another escalation that could drive oil prices even higher.

Saudi Aramco CEO Amin Nasser said last week that disruptions to shipments through Hormuz could delay stability returning to oil markets until 2027, potentially impacting around 100 million barrels of oil supply every week.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)