balance

Oil markets face renewed instability following the United Arab Emirates’ formal exit from the Organisation of the Petroleum Exporting Countries (OPEC) and its wider alliance (OPEC+), announced on Tuesday and taking effect on Friday.

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The move, which ends decades of membership, comes as the global economy continues to reel from the ongoing war with Iran and the blockade of the Strait of Hormuz remains in place.

Investors are currently weighing the potential for higher future output from the UAE against the immediate and acute risks posed to global supply routes, as well as the increased chances that more countries drop out of OPEC and OPEC+.

Following the announcement, markets reacted swiftly as the potential for oversupply from the UAE was priced in. Oil prices fell by between 2% and 3%, particularly in futures contracts a couple of months ahead.

However, the move was just as quickly offset by the risk premium associated with the Middle East conflict and the current halt to US-Iran negotiations.

At the time of writing, US benchmark crude, WTI, is trading above $105 a barrel, while Brent crude, the international standard, is over $112. Both prices are around 4% higher on Wednesday from the UAE announcement low.

The UAE’s decision follows years of simmering tension between Abu Dhabi and Riyadh over production quotas. The UAE has invested over $150 billion (€128bn) in the state-owned Abu Dhabi National Oil Company (ADNOC) to expand its capacity to five million barrels per day.

However, under OPEC’s restrictive framework, much of this capacity remained underutilised, now prompting the government to prioritise its national interest.

The departure of the group’s third-largest producer is a significant blow to the cohesion of the 60-year-old organisation. Maurizio Carulli, global energy analyst at Quilter Cheviot, noted the limitations this exit places on the remaining members.

“Until tanker traffic through the Strait of Hormuz is safe again, OPEC’s ability to stabilise prices is sharply constrained, while US producers have gained outsized influence,” Carulli explained.

While the UAE has pledged to bring additional production to the market in a “gradual and measured” manner, the sudden lack of coordination within OPEC has introduced a new layer of uncertainty.

For the UAE, the blockade served as a final catalyst for its exit. With its primary export route under threat, Abu Dhabi has sought the diplomatic flexibility to forge independent security and trade partnerships outside the traditional cartel structure.

Despite the geopolitical turmoil, energy equities have remained resilient.

According to Carulli, “integrated majors such as BP, Shell, TotalEnergies, ENI, Chevron and ExxonMobil are benefitting from a price uplift that could add 5-10% to operating cash flow for every $10 increase in oil prices.”

Standoff over the Strait of Hormuz

In a separate but related development, the security situation in the Middle East remains precarious despite a fragile ceasefire. Iran has recently offered a ten-point proposal to reopen the Strait of Hormuz.

In exchange for restoring maritime traffic, Tehran is demanding a full withdrawal of the US naval blockade and an end to the current hostilities.

US President Donald Trump, who recently extended the two-week ceasefire mediated by Pakistan, described the latest Iranian offer as “much better” than previous iterations but still did not accept the terms.

Shortly after, Trump posted on social media claiming that Iran is in a dire and desperate condition with no leverage to negotiate.

Washington continues to insist on a permanent settlement regarding Iran’s nuclear programme and an “unconditional” reopening of the waterway before sanctions are lifted.

The impact of this blockade on global energy security cannot be overstated.

“The prolonged closure of the Strait of Hormuz has removed roughly 12% of global oil supply from the market, according to the IEA, a bigger disruption than the Yom Kippur war, the Iran‑Iraq conflict, the invasion of Kuwait or even the fallout from Ukraine,” Carulli highlighted.

April 20 (UPI) — Iran said that it carried out drone strikes on Monday against U.S. military vessels blockading its ports after the U.S. Navy attacked an Iranian-flagged container ship in the Gulf of Oman.

The state-run Tasnim News Agency said the Iranian military “launched drone strikes toward several U.S. military vessels in the area” in retaliation for the boarding and seizure of the Touska on Sunday night while it was en route to Iran from China.

“We caution that the Armed Forces of the Islamic Republic of Iran will soon respond to and retaliate for this act of piracy and armed aggression by the US military,” Khatam al-Anbia Central Headquarters, the Iranian military’s central command, said in a statement

Khatam al-Anbia Central Headquarters said the Iranian Armed Forces had held off from delivering “a decisive response” to “blatant aggression by U.S. terrorist commandos” due to concerns for the safety of family members of the ship’s crew who were on board the Touska.

“Iran’s operational action was delayed in order to protect their lives and security, which were in constant danger,” the statement added.

The U.S. military did not immediately comment on Iran’s claim it conducted drone strikes.

However, U.S. Central Command posted video of the guided-missile destroyer USS Spruance warning the Touska to “vacate your engine room” because it was about to open fire and, some time later, night-vision footage of helicopter-borne U.S. Marines from USS Tripoli conducting an amphibious assault operation to take over the vessel.

CENTCOM said the Spruance intercepted Touska as it was steaming toward the Iranian port of Bandar Abbas, issuing multiple warnings over a six hour period that it was in violation of the U.S. blockade. When it refused to stop, the Spruance fired several rounds from its 5-inch gun hitting the engine room and disabling the vessel.

U.S. Marines from the 31st Marine Expeditionary Unit later boarded the vessel and took control of the vessel, which remains in U.S. custody.

CENTCOM said U.S. forces had ordered 25 commercial vessels to turn back, or return to an Iranian port, in the week since the United States implemented its blockade of Iranian ports on April 13.

However, Sunday was the first time that the U.S. military is known to have opened fire on merchant shipping since the war started Feb. 28.

The escalation came after a rollercoaster weekend that began with Tehran declaring that the Strait of Hormuz was fully open to all commercial shipping for the remainder of the 14-day cease-fire currently in place, which is due to expire on Wednesday.

The move was welcomed by the United States, but the administration of U.S. President Trump made it clear its blockade would remain in place. That prompted Tehran to accuse the United States of violating the cease-fire and by Saturday it declared the strait closed again and at least one tanker was fired on by two Iranian gunboats as it attempted to enter the sea lane.

The developments have cast doubt over peace talks, which are due to resume in Islamabad, Pakistan, later Monday or first thing Tuesday.

Trump said in a post on his Truth Social platform that U.S. negotiators would arrive in the Pakistani capital on Monday night, with the White House later confirming that Vice President JD Vance would again head up the U.S. delegation, picking up from where he left off from in an initial round of talks on April 11 that failed to produce a breakthrough.

Tehran said Monday it had not yet decided whether it would attend.

“As of now, while I am speaking to you, we do not have a plan for the next round of negotiations, and no decision has been taken in this regard,” Foreign Ministry spokesperson Esmaeil Baqaei said at a press conference in Tehran.

Referencing the ongoing U.S. blockade and seizure of the container ship, Baqaei accused the United States of actions that “are in no way indicative of seriousness in pursuing a diplomatic process.”

However, the comments do not mean Iran will not show in Islamabad.

The Iranian side only confirmed participation in the first round of negotiations at the last minute.

Global oil prices, which fell sharply on Friday after Iran said the Hormuz Strait was open, rose again over the weekend but were holding steady in late morning trade in London where Brent crude for June delivery contract was changing hands at $95.24 a barrel and West Texas Intermediate for May delivery was changing hands at $88.89 a barrel.

Traffic through the strategically vital Strait of Hormuz remains largely stalled, according to multiple reports, despite Iran and the United States agreeing to a two-week ceasefire. Earlier this week, U.S. President Donald Trump had given Tehran a deadline to agree to his ceasefire demands, including reopening the strait, or he threatened to turn Iran into a “living hell.”

Only one oil products tanker and five dry bulk carriers have passed through the Strait of Hormuz in the last 24 hours, according to ship-tracking data analysis, Reuters reports. Since the U.S.-Israeli war with Iran began on February 28, vessel traffic has averaged only a few ships per day, based on data from Kpler, Lloyd’s List Intelligence, and Signal Ocean. Prior to the conflict, an average of ⁠140 vessels transited daily through the strait.

According to data from Windward, a maritime intelligence firm that tracks international shipping, 11 vessels have been allowed transit through the strait in the 24 hours since the ceasefire. Four of these ships are Iranian, four are Greek, and one is Chinese.

Intelligence firm AXSMarine reports that two eastbound ships, the Oman-owned Lucia and Greek-owned Iolcas Destiny, were given passage from the Gulf in the early hours of Thursday morning despite the Iranian declaration that the strait was closed.

Windward said all vessels transiting the strait must still coordinate safe passage with Iranian authorities, who are requiring shippers to pay substantial tolls, reportedly as much as $1 per barrel for outbound oil, settled in cryptocurrency. For context, the largest supertankers can carry up to three million barrels of crude.

According to an unconfirmed report from Russia’s TASS news agency, quoting an unnamed senior Iranian source, Iran will allow no more than 15 vessels a day to pass through the strait under the ceasefire agreement.

Meanwhile, Iran’s deputy foreign minister, Saeed Khatibzadeh, claims that the strait has been mined, forcing all ships to use channels that are controlled by Iran.

There are still around 1,400 ships waiting at anchorages on both sides of the narrow passage.

Although the strait has remained effectively closed since the war began, Iran has granted limited exemptions to allies, including China, Russia, India, Iraq, and Pakistan, while some Malaysian and Thai vessels have also been permitted to transit following diplomatic negotiations in recent weeks.

Now, the Israeli campaign in Lebanon is being identified as a major sticking point in fully reopening the strait.

The United States and Israel maintain that the two-week ceasefire now in place does not apply to Lebanon, where the Israeli military carried out one of its heaviest waves of airstrikes yesterday.

Iran and Pakistan, which helped broker the ceasefire, insist that Lebanon is included in the agreement.

Iranian President Masoud Pezeshkian described Israel’s latest strikes on Lebanon as a “blatant violation” of the ceasefire agreement, and their continuation would “render negotiations meaningless.”

In a statement on X, Pezeshkian wrote, as per machine translation:

“Israel’s renewed incursion into Lebanon is a blatant violation of the initial ceasefire agreement. This is a dangerous sign of deception and lack of commitment to potential agreements. The continuation of these actions will render negotiations meaningless. Our fingers remain on the trigger. Iran will never abandon its Lebanese sisters and brothers.”

Deputy foreign minister Khatibzadeh accused Israel of carrying out a “surprise attack” on Lebanon, calling it a “serious violation” of the ceasefire agreement.

“It was a sort of genocide, you know, by the regime of Israel in Lebanon, just immediately after the ceasefire was accepted,” Khatibzadeh told the BBC. “It is a type of practice that the Israeli regime has always done: accepting ceasefire, then surprise attack, massacring.”

He added that the United States “must choose between war and ceasefire”, saying: “They cannot have both at the same time.”

Khatibzadeh continued: “If President Trump … is interested in peace for the whole Middle East, and since Iran is committed to that, we ask everybody in the Middle East to be abided by this agreement and this ceasefire that we reached with Americans, and we expect Americans do the same with its ally, the Israeli regime.”

The speaker of the Iranian parliament, Mohammad Bagher Ghalibaf, reiterated that Lebanon forms “an inseparable part of the ceasefire” deal. In a post on X, he said, “There is no room for denial and backtracking”. Ghalibaf added: “Ceasefire violations carry explicit costs and STRONG responses. Extinguish the fire immediately.”