Tradingkey – Geopolitical tensions shifted abruptly over the weekend as U.S.-Iran relations escalated following the conclusion of President Trump’s visit to China.
Renewed expectations of a prolonged blockade of the Strait of Hormuz pushed both major crude oil benchmarks to near two-week highs. At the time of writing, Brent crude has surpassed the $110 mark, rising 1.80% to $111.45 per barrel, hitting its highest level since May 5 during intraday trading; WTI crude futures rose 2.39% to $103.41 per barrel.
[Source: TradingView]
On May 17, 2026 local time, U.S. President Trump issued an ultimatum to Iran during a phone interview with Axios, stating that “time is running out” for Iran and that it will face “much more severe strikes than before” if it fails to propose more sincere deal terms.
U.S. officials revealed that the Trump administration still hopes to resolve the conflict through diplomatic channels, but Iran has rejected several core U.S. demands and failed to make substantive concessions on its nuclear program, putting military options back on the agenda. According to two officials familiar with the matter, Trump will convene his senior national security team in the White House Situation Room on Tuesday, May 19, to specifically discuss military action plans against Iran.
Despite his tough stance, Trump expressed belief that Iran intends to reach a deal and is waiting for the country to submit an updated proposal.
CICC recently analyzed that the Strait of Hormuz currently has only limited navigation, and supply disruption issues persist; while a decline in Asian imports and an increase in U.S. exports have temporarily eased tensions, global inventories have fallen to their lowest levels in nearly eight years. With the peak summer travel season approaching, oil prices could skyrocket again at any moment if the blockade is extended.
On the other hand, previous market consensus largely bet that navigation in the Strait of Hormuz would resume in June. This included Goldman Sachs which set “reopening starting in the near term and full navigation completed by late June” as its base case, forecasting that Brent crude prices would fall back to $90 per barrel by the end of 2026.
Royal Bank of Canada (RBC) issued a completely opposing view, arguing that the market has severely underestimated the duration of this blockade and its systemic shock to the global energy system.
The firm stated that if the supply disruption of approximately 12.5 million barrels per day continues until the end of May, cumulative supply losses will exceed 1 billion barrels; if the blockade is extended further until the end of June, cumulative losses will approach 1.5 billion barrels. With the arrival of the Northern Hemisphere’s summer travel peak and global crude inventories at eight-year lows, oil prices “are likely to surpass historical highs from the Russia-Ukraine conflict and approach 2008 peak levels.” According to historical data, NYMEX WTI crude surged to a record high of $145 per barrel in July 2008, while Brent crude also reached an all-time high of $147.50 per barrel.
At that point, the market would only be able to rebalance through the extreme mechanism of demand destruction, which would trigger a significant rise in global sovereign bond yields and expose stock markets to the systemic risk of a sharp decline.