MW Oil climbs as Trump warns the 'clock is ticking' on Iran, but there's a bigger danger lurking on the horizon
By Myra P. Saefong
A loss of buffers to cushion oil-supply disruptions could spark the next big price move higher
The oil market has been relying heavily on alternatives to make up for the loss of oil supplies from the effective closure of the Strait of Hormuz.
Oil futures climbed on Monday, getting a boost after President Donald Trump warned that the "clock is ticking" on Iran. Yet a loss of buffers that cushioned supply disruptions in recent weeks could spark the next significant move higher for prices.
The oil market may need to see evidence of current supply buffers running out before traders finally trigger another big move higher, said Stephen Innes, managing partner at SPI Asset Management.
Such proof could come with the Strait of Hormuz staying shut through peak summer demand, Innes said. It also might emerge in visible diesel shortages or from renewed attacks on Persian Gulf infrastructure. Oil inventories also could fall faster than expected or the U.S. could restart military attacks that "could reignite the regional tinderbox."
On Monday, global benchmark Brent crude (BRN00) saw its July contract (BRNN26) rise 1.6% to $111 a barrel after rising 7.9% last week. U.S. benchmark West Texas Intermediate crude for June delivery (CLM26) (CL.1) added 1.3% to $106.76 following an almost 11% climb last week.
See: The oil market is reaching a 'tipping point' that could create problems for stocks, according to this Wall Street legend
Earlier on Monday, oil was trading modestly lower, after Tasnim News Agency reported that the U.S. appeared to accept Iran's demand for a temporary lifting of economic sanctions during the negotiating period. U.S. officials, however, said that report was false.
Yet once the market's supply buffers run out, the market "stops trading headlines and starts trading outright supply exhaustion, and that is when oil could move sharply higher very quickly," Innes told MarketWatch.
With the effective closure of the Strait of Hormuz, the oil market has faced one of its biggest supply shocks in decades, he said. On paper, the shipping disruptions have impacted around 20 million barrels per day of crude and refined products, although Saudi Arabia and the U.A.E. have rerouted a "surprisingly large" volume of crude through pipelines to help ease the immediate supply panic, he said.
Last week the International Energy Agency estimated that the global oil market has lost about 12.8 million barrels per day because of the Iran war.
Read: The world lost nearly 1 billion barrels in oil supply over the past 75 days. Why investors aren't worrying enough.
"Some oil is floating on tankers, some is delayed, some is stranded and some production is temporarily shut in," Innes said. Ultimately, oil is a timing market, so a barrel that arrives three months late is still "missing when refiners need it today."
Meanwhile, the oil market has been relying heavily on alternatives to make up for that loss of supply. That's where the U.S. Strategic Petroleum Reserve comes into play - reductions in the amount of oil sent to refineries as well as, potentially, outright inventory drawdowns, said Rebecca Babin, senior energy trader and managing director at CIBC Private Wealth.
When the market has finally sucked the available supply buffers dry, that could be the ultimate catalyst for the next significant leg higher in oil, she told MarketWatch.
Right now, the market appears "comfortable watching balances tighten gradually without aggressively repricing crude higher, because there remains a broad belief that the strait will reopen before true tank bottoms become visible," Babin said. "It has become a game of chicken between physical tightening and confidence that diplomacy or reopening headlines arrive before inventories become critically stressed."
Still, Innes said there are some traders who still believe this conflict will eventually be contained because Washington ultimately wants lower gasoline prices ahead of the U.S. midterm elections in November.
The average national price for a gallon of gasoline edged down by a penny over the past week to $4.47 Monday, according to GasBuddy. Global oil inventories continue to move toward historically tight levels, however, so gasoline and diesel prices are likely to remain volatile, said Patrick De Haan, head of petroleum analysis at GasBuddy, in a market update.
With the Memorial Day holiday on Monday, which traditionally marks the start of the summer driving season in the U.S., any sustained increase in oil prices could begin pushing retail fuel prices higher in the weeks ahead, De Haan said.
Robert Schroeder contributed.
-Myra P. Saefong
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(END) Dow Jones Newswires
May 18, 2026 13:44 ET (17:44 GMT)
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