Oil Price Soars in One Week, Just the Beginning? Top Economists Warn Rise May Widen

The international oil prices surged sharply during the week of April 30, becoming the most intense increase since the recent Middle East conflict.Brent CrudeWeekly gain reached 10%, with prices breaking above $110 per barrel; June-delivery Brent crude futures surged 4.1% to $123 per barrel, the highest level since 2022.WTI crude oilSynchronized strength, stabilizing above $108.

Diplomatic efforts concerning the Persian Gulf situation have clearly faltered. Markets had previously anticipated a de-escalation of the conflict through negotiations, but recent developments indicate that differences between the U.S. and Iran are widening. According to U.S. media reports, Washington has begun preparing contingency plans for a prolonged blockade of Iran and has rejected Iran’s proposal to restore freedom of navigation in the Strait of Hormuz in exchange for resuming nuclear negotiations.

Military tensions have also intensified. Reports indicate that the U.S. Central Command has devised a “short and powerful” strike plan. ING analysts point out that…Market expectations have swiftly shifted from earlier optimistic assessments to evaluations of real-world impacts, and supply disruption risks are transitioning from hypotheticals to actual threats.

The situation in the Strait of Hormuz has become a core variable in the current energy market. This waterway carries a significant portion of the world's crude oil, but it is currently in a state of high tension: Iran is strengthening its control and imposing transit fees, while the U.S. Navy is imposing strict restrictions on related vessels.

Amid bilateral tensions, this critical channel has become "functionally paralyzed." Economist Mohamed El-Erian stated,Escalating tensions in the Middle East, declining global inventories, and increased supply risks in the Gulf region are key drivers pushing up oil prices. He also warned that market volatility may persist, and if these risks intensify, the oil price rally could further expand.

Behind the price increase, the supply-demand fundamentals have also significantly deteriorated. Daan Struyven, Goldman Sachs’ commodities analyst, noted that satellite data shows global crude oil inventories are declining at a rate of 11 to 12 million barrels per day.Set the fastest inventory depletion pace ever recorded.

The output in the Persian Gulf region has significantly declined, further widening the supply gap. Current daily output in the region has fallen from 26.4 million barrels before the conflict to 11.9 million barrels, a reduction of approximately 14.5 million barrels. At the same time, U.S. commercial crude oil inventories have continued to decline, further compressing the global market's buffer space.

Under conditions where supply recovery is difficult, the market equilibrium mechanism is shifting toward the demand side. ING believes that once inventories are further depleted, “demand destruction”—i.e., curbing consumption through high oil prices—will be the only possible way to rebalance supply and demand.

Currently, demand has shown an initial decline, with a reduction of about 1.6 million barrels per day, but this remains limited compared to the massive supply gap. If the geopolitical deadlock continues, the upward potential of oil prices may not have been fully realized. The continuous reduction in inventories, coupled with the potential for military escalation, is pushing the global energy market into a phase of significantly increased uncertainty.