Unless you've been living under a rock, the Iran-US war, and more directly, its impact on global oil prices, has been the headline topic in recent weeks. After the United States and Israel commenced an ill-conceived attack on Iran, the Islamic Republic imposed controls on the crucial oil transit bottleneck of the Strait of Hormuz. As a result, oil skyrocketed by more than 50% to rise above $100 a barrel just in time for Easter. A supposed ceasefire agreement and reopening of the Strait for US-allied countries led markets to believe that the worst was now behind us, prompting Brent to dip back down to around $90 a barrel by 17 April. But Trump's subsequent blockade of Iranian ports and the breakdown in talks in Islamabad led to an intensification of uncertainty and more price rises. At the time of writing on 30 April, Brent has now returned to 2022 levels, hitting $121.65 per barrel, which marks a shocking YTD gain of over 100%. While this might be devastating for ordinary consumers, it has provided an incredible opportunity to profit for savvy investors.
The chief factor determining where oil could be headed in the medium term remains, unsurprisingly, the US's conflict with Iran, but the supply-side wildcard of OPEC+ production and strategic reserve releases remains a key lever, too. As does the natural market pressure that high prices put on demand and economic growth, leading inexorably to a race towards equilibrium over time. In this piece, we'll cover all these factors and more as we attempt to plot oil's next moves.
Continued price rises and dwindling reserves
Oil prices have not cooled in the way many expected after the initial panic. Instead, the market has entered a more worrying second phase in which the initial geopolitical shock has devolved into a sustained supply crisis. Brent crude is now trading above $120 a barrel and has touched intraday highs above $126, a level unseen since 2022, as traders conclude that disruption in the Gulf is no longer a temporary scare but a genuine, long-term constraint on global energy flows. The main pressure point remains the Strait of Hormuz, through which around a fifth of the world's oil normally passes. What began as a fear premium is increasingly becoming a physical premium. Less cargo is moving freely, which means higher insurance costs and longer voyage times, as refiners scramble to secure alternative grades.
Even where oil is available, getting it to market has become slower and more expensive. Export infrastructure, storage terminals, refining assets, and shipping logistics across the Gulf have all been disrupted to varying degrees, and even where facilities remain fully operational, insurers, tanker owners, and buyers are demanding higher premiums before resuming business as usual. Consumer nations have tried to soften the blow by leaning on strategic reserves and commercial inventories, but those buffers are thinning fast. US crude inventories, for example, fell by 6.2 million barrels in the latest weekly data to 459.5 million barrels, while exports surged to record highs as Europe and Asia sought to replace supplies. That matters because every barrel shipped from storage today is a barrel that may need replacing tomorrow. If governments move to rebuild emergency reserves later this year, the market could face an additional source of demand layered on top of an already stretched supply chain. In that sense, $120 oil is not simply about war headlines anymore. It reflects a world discovering that spare capacity, spare reserves and spare patience are all scarcer than assumed.
Self-limiting demand and producer power struggles
Even as a resolution to the war remains elusive, the next chapter may depend less on missiles and more on economics. Historically, very high oil prices sow the seeds of their own decline by slowing growth, harming business confidence, and finally reducing fuel demand. There are already signs that this process is beginning. Analysts increasingly warn of a stagflationary backdrop in which energy costs remain elevated while global growth softens, particularly across import-dependent economies in Europe and Asia. Reuters noted this week that Brent has risen roughly 75% since the war began on 28 February, a move large enough to strain consumers and corporate margins even before the secondary inflation effects emerge.
Yet demand weakness alone may not be enough to restore balance if supply remains impaired. The oft-parroted assumption that OPEC+ can simply turn a valve and restore order looks less certain than it once did. Tensions between individual members of the producer group have become harder to ignore, highlighted by the UAE's recent decision to leave OPEC. Saudi Arabia still holds the greatest spare capacity and remains the cartel's central actor, but every attempt to defend prices comes with a trade-off: Cede market share to rivals, particularly the United States, or produce more and risk lower revenues. That said, at current elevated prices, there will always be an incentive to make hay while the sun shines, so to speak. American shale producers, meanwhile, are more disciplined than in the 2010s, but at sustained prices above $70–75 for WTI, many remain highly profitable and capable of expanding output over time. The result is a market with a higher floor but also a visible ceiling. Prices can stay irrational while disruption persists, yet the longer they remain above $120, the stronger the likelihood of demand destruction, fuel substitution, and non-OPEC supply growth. For investors, this is no longer a simple spike to fade or chase. Instead, it's a prolonged contest between scarcity and adaptation, one whose final result is yet to be seen.