Brent crude was trading at $73 a barrel the morning the US and Israel launched attacks on Iran on February 28. It stood at $60 when the year began. On Tuesday, it crossed $111.

Futures for June delivery climbed 2.7% to $111.09 per barrel, according to CNBC, after reports that President Donald Trump is unhappy with Iran’s latest proposal to end the conflict. The US benchmark, West Texas Intermediate, rose 2.2% to $98.50, marking Brent’s seventh consecutive session of gains.

The immediate trigger was diplomatic. Iran proposed reopening the Strait of Hormuz — conduit for roughly one-fifth of global oil supply — conditional on Washington lifting its blockade and ending hostilities. White House press secretary Karoline Leavitt confirmed Trump met with his national security team to discuss the offer. Two people familiar with the matter told CNN that Trump signaled he was unlikely to accept it.

Trump has maintained that any deal requires Iran to forfeit its near bomb-grade uranium and give up enrichment — demands Tehran has refused. The gap may be narrower than it appears, though. Sources familiar with the mediation told CNN that talks center on a staged agreement: reopen the Strait first, address the nuclear program later.

The $15 Risk Premium

That diplomatic uncertainty is now baked into every barrel. Citigroup on Sunday revised its expected average price for global oil upward by $15 — to $110 for the second quarter and $95 for the third. If the Strait stays closed through June, Citi forecasts oil hitting $150.

Even if the war ended tomorrow, Andy Lipow, president of Lipow Oil Associates, estimated crude would drop only about $10 per barrel. A return to normal conditions would take four to six months, he told CNBC, citing mines to clear, tanker congestion, and the need to restart refining. “The longer the conflict goes on, the higher the price, especially as inventories are drawn down to critical operating levels,” Lipow added.

Running on Storage

The world has been living on oil loaded onto tankers before the February 28 attacks, supplemented by whatever was in storage. That buffer is almost gone.

Oil inventories in some countries are days or weeks from “operational minimums,” according to Natasha Kaneva, head of global commodities research at JPMorgan. Below that threshold, the energy system seizes up: refineries stall, flows bottleneck, supply chains cascade. She noted the effects are already visible across Asia, particularly in middle distillates and jet fuel.

Jenna Delaney, Rapidan Energy Group’s director of global crude, reported “steep declines” in Asian storage. Global refineries have cut production runs because they can’t source enough crude, and refined product supplies are strained — just as demand typically rises in summer.

The Bill Arrives

US gasoline prices have already climbed more than $1 a gallon since the war began, a major reason the conflict is unpopular with the American public. But analysts say the real shock hasn’t landed yet.

Dan Pickering, chief investment officer at Pickering Energy Partners, warned that summer driving season will deliver another gas price spike that “hits people in the face.” The stock market, he told Politico, is largely ignoring the risk.

Emma Anderson, a senior fellow at the Stimson Center and author of “Oil, the State, and War,” said the inflationary impact is already locked in. Diesel drives trucking costs, which drive the price of everything shipped by road. “The things you buy at the store will get more expensive,” she told Politico.

The Jawbone Trap

Trump has repeatedly used Truth Social to claim the war is near an end and gas prices will soon retreat. The jawboning has worked — partially. Futures prices remain well below spot prices, which have touched $140. But analysts warn the gap between paper markets and physical reality is widening dangerously.

Rosemary Kelanic, director of the Middle East Program at the Defense Priorities think tank, said the administration’s confidence that normalcy is just over the horizon is actively discouraging US producers from ramping up output. “By talking down the market so effectively, when the price spike becomes inevitable, it’s going to hurt way worse because we’ll have lost weeks or even months of time where producers could have been ramping up output,” she told Politico.

One oil executive put it more bluntly in a recent Dallas Fed survey: the president “sends conflicting signals to operators who cannot plan rigs and capital budgets when prices swing wildly based on tweets.”

BP, for its part, reported first-quarter profit more than doubled to £3.2 billion ($4.3 billion), as its traders capitalized on the volatility. Someone is making money from this. It just isn’t the person filling up at the pump.

Sources