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Footage released by the Pentagon shows US strikes on two Iranian oil tankers in the Strait of Hormuz. The US military says the vessels were disabled following overnight exchanges of fire with Iranian forces, preventing them from reaching ports in the Gulf of Oman.

A South Korean vessel has successfully passed through the Red Sea and is currently en route home, marking the fourth oil shipment of its kind, the oceans ministry said Friday.

The arrival comes as Seoul has been scrambling to bring in oil through alternative routes amid the ongoing blockade of the Strait of Hormuz.

After loading oil shipments at Saudi Arabia’s Yanbu Port, the ship passed through the Red Sea at around 11:00 a.m., the Ministry of Oceans and Fisheries said. Details of the vessel’s movement were withheld due to safety reasons.

The ship is the fourth Korean oil carrier to transit the waterway that connects the Indian Ocean to the Mediterranean via and Suez Canal since the country began using the waterway to avoid the Strait of Hormuz.

That water lane has effectively been blocked by Iran for over a month.

The first Korean ship to take the alternate route since the war began arrived at a port in the southwestern city of Yeosu on Thursday, carrying some 2 million barrels of oil, according to sources familiar with the matter. The ship had left the Red Sea last month.

Two more Korean oil carriers successfully passed through the Red Sea earlier this week.

The ministry said it will continue efforts to stabilize oil shipments to the country and take steps to ensure the safety of Korean vessels and crew members navigating through the region.

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Brent crude rises amid clashes in critical waterway.

Oil prices have jumped after clashes between United States and Iran in the Strait of Hormuz pushed their tenuous ceasefire to the brink.

Futures for Brent crude rose as much as 7.5 percent during a volatile trading session on Thursday, before easing as Asia’s markets opened on Friday morning.

The international benchmark stood at $101.12 per barrel as of 03:00 GMT, down from the day’s high of $103.70.

The latest rise came after the US and Iran exchanged fire in the critical strait, a conduit for about one-fifth of global oil and natural gas supplies, despite the truce announced between the sides on April 7.

US Central Command (CENTCOM) said it launched strikes on Iran after three US Navy guided-missile destroyers came under attack from Iranian missiles, drones and small boats in the strait.

Iran’s Khatam al-Anbiya Central Headquarters earlier accused the US of violating the ceasefire by attacking an Iranian oil tanker and another vessel in the vicinity of the waterway.

The Iranian military headquarters also accused the US of targeting civilian areas, including Qeshm Island.

US President Donald Trump on Thursday appeared to downplay the clashes, saying the ceasefire remained in effect, while Iran’s state-run Press TV said the situation had gone “back to normal”.

Shipping in the strait has been at a near standstill since late February amid the threat of Iranian attacks on the massive oil tankers that usually transport much of the world’s energy supplies.

Brent prices are up about 40 percent compared with before the war amid an estimated shortfall in daily production of 14.5 million barrels.

Asian stock markets opened lower on Friday amid the heightened tensions, with Japan’s benchmark Nikkei 225, South Korea’s KOSPI and Hong Kong’s Hang Seng Index each falling more than 1 percent.

On Wall Street, the benchmark S&P 500 fell about 0.4 percent overnight after hitting an all-time high the previous day.

May 6 (UPI) — Global oil prices fell sharply and financial markets rallied Wednesday after U.S. President Donald Trump paused a military operation to reopen the Hormuz Strait to commercial shipping to give advanced peace talks with Iran a chance to deliver “a complete and final deal.”

Falls in Brent crude of more than $10 a barrel to $99, American crude by $13 to $92 a barrel and rallies in Asian stock markets overnight that fed into Europe when bourses opened there failed to feed through to U.S. gas prices, which jumped 5 cents a gallon to their highest level of the war.

AAA motor club figures showed a national average of $4.54 for a gallon of petrol and $5.67 for diesel, meaning drivers were paying 53% and 51% more than before the war started on Feb. 28, with the caveat that fuel price adjustments normally lag crude oil price movements by several days.

The White House believes a draft one-page, 14-point memorandum of understanding to end the war and create a structure for more in-depth nuclear talks could succeed in breaking the deadlock, two U.S. officials and two other sources said.

An Iranian foreign ministry spokesman confirmed to CNBC that Iran was in receipt of the U.S. proposal and was “evaluating it.”

The Trump administration anticipates Iran will give its response with regard to the most critical elements of the plan in the next two days and although nothing has been finalized it was being seen as significant because it was the closest the sides had been to a deal since the beginning of the war.

However, Trump also appeared ambivalent, saying Wednesday it was “perhaps” too big of a stretch to believe Iran would take the deal and threatening to order the U.S. military to restart its airborne offensive against the country if it didn’t.

Analysts said investor confidence was boosted mainly by the fact the cease-fire was holding and signs that the economy was nowhere near as badly affected by the war as feared.

“This helped oil prices to come back down again and ease fears about a renewed escalation, with investors a bit more hopeful that an extended stagflationary shock would be avoided,” Deutsche Bank wrote in a note.

It added that investor confidence was also bolstered by new U.S. economic data showing among other positive indicators, that job vacancies declined less than anticipated in March, saying the numbers “cemented the case that the conflict’s wider economic impact was still fairly muted.”

“This helped oil prices to come back down again and ease fears about a renewed escalation, with investors a bit more hopeful that an extended stagflationary shock would be avoided,” they added.

Hopes were also riding on the possibility China would prevail on visiting Iranian foreign minister Abbas Araghchi to persuade Iran to uphold the current truce with the United States, so as not to throw a wrench into Trump’s visit to Beijing on May 14, the first by any U.S. president in almost a decade.

China is one of Iran’s largest customers for its oil exports.

Published on
05/05/2026 – 7:12 GMT+2

Oil prices fell back in early trade but remained elevated as investors kept an eye on escalating tensions between the US and Iran and progress on ships passing through the Strait of Hormuz.

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At the time of writing, Brent crude was trading 1.38% lower at $112.86 while US crude, or WTI, was down 2.27% at $104 per barrel. US futures edged 0.1% higher.

Elsewhere, regional trading was thin overnight with markets in Japan, South Korea and mainland China closed for holidays.

Hong Kong’s Hang Seng fell 1.1% to 25,805.98. Australia’s S&P/ASX 200 lost 0.5% to 8,649.80, while Taiwan’s Taiex traded 0.2% lower at 40,626.22.

The fragile ceasefire between the US and Iran was tested on Monday after the US military said it had sank six Iranian small boats targeting civilian ships, while two US-flagged ships successfully passed through the Strait of Hormuz.

The key waterway for oil and gas transport remains largely closed despite repeated demands from the US for Iran to reopen the strait and as the United States imposed a sea blockade on Iranian ports. US President Donald Trump’s “Project Freedom” plan under which the United States would help guide stranded ships through the Strait of Hormuz began on Monday.

Brent crude, the international standard, surged above $114 a barrel on Monday, gaining nearly 6%. Before the war began in late February, it was trading near $70.

Venezuela’s recent Hydrocarbon Law reform has sparked fierce debates about its short- and long-term implications. In this essay, Blas Regnault, an energy policy analyst and researcher, offers an in-depth analysis of the new legislative framework, from the significant changes to the state’s governance over its natural resources to his perspective on a sovereign recovery of the oil industry.

The recent hydrocarbon reform: an overview

It is important to distinguish between two closely connected but analytically separate developments: first, US oversight of Venezuelan oil revenues after Maduro’s kidnapping; and secondly, the new Hydrocarbon Law itself. The first is an externally imposed mechanism that conditions oil sales, revenue collection, transport, and the distribution of oil proceeds to US interests. The second is a domestic legal reform whose constitutionality and political legitimacy have been widely questioned.

It remains unclear whether the new law is fully operative in practice, or whether it is only being applied selectively while its fiscal substance is displaced by the US revenue-control mechanism. ^{But the outcome is largely the same: a loss of fiscal automaticity and a form of fiscal sovereignty under tutelage in relation to Venezuelan oil income.}

In other words, the crisis of governance in the Venezuelan oil sector, together with its chronic lack of transparency since 2017, now culminates in a profound loss of sovereign control over all three dimensions of the business: its rentier dimension, belonging to the nation; its fiscal dimension, belonging to the state; and its shareholder dimension, linked to the role of the state oil company PDVSA as principal participant in extraction and commercialisation.

Therefore, the new law is not simply a technical reform. It is not merely about updating contracts, modernising procedures, or making the sector more attractive to investors. The deeper issue is that the reform changes the way the nation is compensated for the use of the subsoil and therefore alters the very governance of the sector. What is at stake is the relationship between sovereignty, ownership of the subsoil, and public income.

It is true that, on paper, the law formally preserves state ownership over the resource. But the business models it opens weaken the practical substance of that ownership. And that is the crucial point. Ownership is not a decorative legal formula. Ownership means that the state, acting on behalf of the nation, has the right to decide whether the resource remains underground or is extracted; and if it is extracted, under what conditions, with what public charge, and for whose benefit. The recent reform softens the link between ownership and the nation’s participation as owner of the subsoil, turning something that was once grounded in a general rule into something negotiable, adjustable, and highly discretionary.

A useful way of understanding the economic and social significance of the reform is to distinguish the different streams of public income historically associated with oil in Venezuela. Under the former hydrocarbon law, the nation participated in the oil business through three distinct channels: as owner, as tax authority, and as shareholder. The first channel, corresponding to ownership, was royalty. The second was taxation, arising from the state’s fiscal authority over the activity. The third was dividends, arising when the state participated through PDVSA and therefore received income in its capacity as stakeholder rather than as landlord or tax authority.

This distinction matters because the oil business has historically involved different claimants competing over the fruits of extraction. In a sector marked by extraordinary profitability and strategic importance, the owner of the rent, the fiscal authority, and the capitalist operator all seek to maximize their share of the value generated. In the Venezuelan framework that prevailed before 2026, those three roles were clearly present: the nation as owner of the subsoil, the state as fiscal authority, and the operator as capitalist actor. The new law alters the balance between them.

Royalty

The royalty is where the change is most revealing. As already noted, royalty is the clearest expression of ownership. It is paid upfront. It does not depend on profit. It is charged before taxes are assessed and before the remaining income covers the factors of production; that is, wages, interest, profits, and the other claimants on the project. In other words, royalty is not part of the production costs. If the oil price is 100 dollars per barrel and the agreed royalty rate is 30 per cent, the owner receives 30 dollars per barrel straight away. That is the proprietorial logic in its purest form.This has long been a battleground in the global oil industry. The dispute over rent has historically taken place between the operating companies, whether private national oil companies acting as operators, and the owner of the resource, that is, the landlord. Depending on the property-rights regime, that owner may be a private individual, as in parts of Texas, or the state, as in Venezuela and in most oil-exporting countries. Whether in Texas, Alaska, Saudi Arabia, Kuwait, Norway, the United Kingdom, Nigeria, or Venezuela, the property-rights regime has been the principal legal instrument through which the owner secures a share of the rent. It is a legitimate exercise of sovereignty, recognised by all parties involved in the global oil business.

And yet the new law, in practical terms, empties out that proprietorial logic by turning royalty into a negotiable variable within a range of zero to 30 per cent, something highly unusual in the global oil business. The potential scale of the loss becomes immediately clear once one thinks in terms of export volumes. At an oil price of 86 dollars per barrel, a 1 per cent royalty leaves the nation with less than one dollar per barrel, whereas a 30 per cent royalty yields 25.8 dollars. If Venezuela exports 800,000 barrels per day, that means roughly 688,000 dollars per day under a 1 per cent royalty, compared with 20.64 million dollars per day under a 30 per cent royalty. This is a dramatic compression of the owner’s income. It shows that a high oil price cannot compensate for the hollowing out of the royalty. Put simply, under the new law, higher oil prices will no longer automatically translate into greater income for the nation if royalties are arbitrarily lowered to the benefit of transnational capital. This is not a marginal fiscal concession; it is a radical compression of the nation’s proprietorial income. 

Taxes

Turning to taxes, under the previous legal framework, the fiscal regime included not only taxes on profits, but also local and municipal taxes on oil activity, together with other parafiscal charges and special contributions linked to extraordinary profits. These different channels gave the public side several routes through which to capture value from extraction. Under the new law, much of that architecture is displaced and compressed into an integrated tax on gross income that will also be set in a discretionary fashion up to a fixed ceiling. According to supporters of the reform, this new framework is designed to ensure the project’s “economic equilibrium.” But the political significance of that shift is considerable. What was previously structured through several distinct legal claims can now be more easily absorbed into a flexible package, negotiated project by project. In that sense, this is not simply simplification; it is a substantial thinning of the fiscal claim. Once the fiscal architecture becomes thinner, the public claim over oil value becomes weaker, more flexible, and ultimately more negotiable.

Table 2 illustrates the magnitude of the change using the March 16, 2026, marker Merey 16 price. Under the previous regime, taxes and parafiscal charges alone could amount to about $31 per barrel, or 36 percent of the barrel price. Under the post-reform interim scenario, that could fall to about $17.6 per barrel, or 20.5 percent.

Dividends

Finally, there are dividends arising from state equity participation, and these too must be distinguished from both royalty and taxation. Dividends are not paid because the nation owns the subsoil, nor are they collected because the state exercises fiscal authority over the activity. They arise because the state participates in the business as shareholder and therefore receives part of the profits in its capacity as investor. In other words, dividends represent the state’s participation in the profits of the business itself. But that income is not necessarily available for immediate public use in the same way as royalty or taxation. Part of it may be retained within the company, used for reinvestment, capital expenditure, debt service, or the wider financial needs of the enterprise. So, unlike royalty, which expresses ownership, or tax, which expresses fiscal authority, dividends are tied to the corporate logic of the business. Depending on the ownership structure, this channel of participation may range, illustratively, from zero to 60 per cent of distributable profits.

International jurisdiction of potential oil litigation

There is also an important jurisdictional dimension. By reducing the fiscal share captured by the state and by placing greater weight on contractual flexibility, the reform moves the sector towards a framework that is more exposed to international arbitration. At the same time, the sanctions and licensing regime has become part of a broader architecture of control over the oil business: control over access to the fields, control over marketing channels, and control over financial access to revenues. So, this is not merely a domestic fiscal reform. It is also part of a broader reordering of the legal and financial chain through which Venezuelan oil is governed.

Key takeaways

Supporters of the new law argue that it delivers increased flexibility, greater operability, improved investment prospects, and greater bankability. And that is not a trivial argument. In a country that has experienced production collapse, sanctions, institutional erosion, and a loss of market share, it is understandable that policymakers would seek a framework that appears more attractive to capital. In that sense, the reform may indeed reduce perceived risk and make projects easier to finance. It may also simplify part of the gross take and make negotiations easier. In that sense, the reform should not be caricatured. But it also entails the abandonment of each of the nation’s and the state’s historic roles in the sector, undermining the institutional fabric that once gave the oil economy a degree of stability and rationality.

For that reason, the disadvantages of the reform ultimately outweigh its potential benefits. What is lost is fiscal automaticity. That means the nation is no longer guaranteed a stable share by rule, but must now negotiate it, justify it, or recover it through more uncertain channels. Put differently, the reform replaces payment-by-rule with payment-by-negotiation on a case-by-case basis. In practical terms, each contract will generate its own conditions over each of the principal sources of public income arising from oil activity.

What is also lost is the clarity of a system in which the state charges because it owns the resource, not because the project happens to be commercially convenient. Once royalties become variable and fiscal terms are subordinated to the “economic equilibrium” of the project, the centre of gravity shifts. The guiding principle is no longer the nation as sovereign owner; it becomes the financial viability for the investor/operator. That is a profound political change presented as technical pragmatism.

In summary: the 2026 reform does not abolish formal ownership, but it hollows it out in practice. It replaces a more proprietorial fiscal logic with a more contractualized and discretionary one. That may attract investment, but it also weakens the automatic link between national ownership and national income. Whatever mechanism one chooses to emphasize, the result is much the same: 

• The nation no longer receives royalty by rule, but under externally conditioned arrangements. What is presented as flexibility is a retreat from ownership. 
• The state compresses its fiscal participation at every level. 
• The state oil company weakens its position as an investor. 

Once that happens, the central question is no longer simply, “How much is the state collecting?” but rather “Who decides, under what rules, with what traceability, and with what accountability?”

The historical context of Venezuela’s oil legislation

Venezuela’s oil history is not just a history of contracts or companies; it is a history of how the nation has tried to define its authority over the subsoil. Venezuela did not begin from the same position as many oil-exporting countries in West Asia or North Africa. It was already an independent republic when it developed its mining and hydrocarbons legislation. That matters, because it means Venezuela built a national jurisdictional framework around state ownership of mines and deposits, rather than inheriting a colonial concessionary order imposed from outside. That distinction is central.

From the early twentieth century onwards, successive legal frameworks progressively consolidated the republic’s sovereign claim over oil-bearing land. In other words, Venezuelan oil law was historically moving towards a more explicit assertion of the nation’s right to charge for the extraction of its natural wealth. This is one reason Venezuela mattered so much internationally: not only because it was a major producer, but because it became a reference point for fiscal regimes and sovereign oil governance, including later in the wider OPEC environment. In that sense, Venezuela’s experience was historically complete in a way that few other oil-producing countries were.

Nevertheless, there is a paradox surrounding the 1975-1976 nationalization of the oil industry. On paper, it ought to have marked the culmination of national control, but it did not deepen sovereignty. In practice, it helped produce a shift towards a more internationalized governance structure. The Ministry, as representative of the owner-nation, was gradually displaced by state oil company PDVSA, and PDVSA increasingly operated under a logic of global business rather than one of public sovereign rule. So instead of the owner-state speaking directly, the national oil company became the intermediary, and that had long-term consequences. Put differently, PDVSA, together with international oil capital, gained ground in the long struggle to reduce the landlord’s direct grip over rent.

This is where the historical relationship with Western transnational corporations becomes more nuanced than a simple story of foreign domination versus nationalist resistance. The issue is not merely the presence of Western companies, but the governance structures they operate under. Venezuela moved from a more classic proprietorial regime towards a more cessionary one, and later, especially in the late 1980s and 1990s, towards more liberal or non-proprietorial arrangements. The oil opening (“Apertura Petrolera”) of the 1990s is especially important here, because it reduced the fiscal burden and shifted the framework in a way that centralized the operator’s conditions. That was already a major break.

The Chávez years brought a partial reversal. The restoration of the property right was not merely ideological posturing; it was a restoration of a more classical fiscal logic, in which the sovereign character of the state take was reaffirmed. But that restoration took place amid other contradictions, including the politicization of PDVSA and the accumulation of debt. So even that phase did not resolve the deeper institutional tensions.

The 2026 reform, then, does not emerge from nowhere. It is a new chapter of a long historical movement: from national jurisdiction, to nationalization, to cessionary governance, to the oil opening, to partial reassertion, to crisis and collapse, and now to a new form of contractualization from a position of weakness. Venezuela’s oil history has been a struggle not simply over who owns the oil, but over who governs the terms on which ownership is exercised. The present reform is the latest chapter in that struggle, but it is a particularly radical one because it comes after institutional erosion and under a global order that is far more contractual, litigious, and externally structured than the one Venezuela faced in the mid-twentieth century.

Oil in the present geopolitical battle

The current geopolitical context of the US-Israeli aggression against Iran should, in principle, strengthen Venezuela’s bargaining position. When West Asia becomes more unstable, supply security rises as a strategic concern, and oil regains immediate geopolitical urgency, countries with large reserves and an established production history become more valuable. 

Venezuela has occupied that position before. Venezuelan oil played an important strategic role for the Allies during the Second World War, for example. Today, renewed disruption around Iran and the Strait of Hormuz has again tightened the market and raised the geopolitical value of accessible barrels.

That is precisely why the current outcome appears so paradoxical. If global conditions improve Venezuela’s leverage, one would expect the country to negotiate from a stronger position and to demand a larger participation. One would expect a legal framework that captures more rent, not less; that uses geopolitical scarcity to reinforce state take, not to dilute it. But the current reform, alongside the sequence of deals with foreign conglomerates, and combined with US control over revenues, seem to move in the opposite direction.

This leads to the second point: the geopolitical issue is not only price or supply. It is also about control. What is emerging is a form of sovereignty under tutelage. Venezuela may formally remain the owner of the resource, but effective control over commercialization, revenue channels, and external validation appears increasingly conditioned from outside. Whether one calls that tutelage, external supervision, or subordinated reintegration, the takeaway is the same: sovereignty over the resource is no longer identical to sovereignty over the business. Recent US licenses illustrate the point very clearly. Washington has opened the door to renewed oil transactions with PDVSA, but under Treasury oversight and with proceeds channelled into US-administered accounts. That is not normal sovereign control over national oil income.

This is where the distinction between the origin and the destination of rent becomes especially useful. Even before we ask what is done with oil income socially or politically, we first need to know how that income is generated: through what pricing, what discounts, what fiscal structure, and through which payment channels. If that first level is opaque, then both the origin and the destination of rent become politically indeterminate. In other words, the problem is not only that the country may receive less revenue. The problem is that the country may not even be able to clearly verify what it is owed, how, and why. That is a much deeper sovereignty problem.

As a result, a geopolitical context that would, in theory, favor Venezuela, sees the country re-entering global markets with weakened sovereignty, under a framework of greater flexibility for operators and less certainty for the nation. That is why the debate is no longer only about production volumes or export flows. The real debate is about the jurisdictional and political order that now governs Venezuelan oil: who authorizes, who commercializes, who arbitrates disputes, who tracks the proceeds, and who answers to the country.

What does a sovereign recovery look like?

Moving from critique to programme is difficult, and the first honest thing to say is that no one can predict the exact path ahead. Venezuela is emerging from collapse, sanctions, loss of market share, institutional erosion, and a deep social crisis. Any recovery scenario, therefore, is bound to be politically fraught. But one thing is clear: if the country does not rebuild the public intelligibility of oil income, then any so-called recovery may simply reproduce opacity, distrust, inequality, and social tension.

A sovereign recovery does not mean autarky. It does not mean excluding foreign firms, nor does it mean mechanically returning to an earlier model. It means something more precise: restoring the link between ownership, public rule, and accountable income capture. In other words, if the nation owns the resource, then the nation must be able to know, verify, and govern how value is extracted from it. That means transparency over net prices, discounts, taxes, royalties, exemptions, payment channels, and the destination of funds. Without that, there can be no recovery in any meaningful sovereign sense. It would simply be resumed extraction.

A sovereign recovery also requires stripping away some of the ideological confusion that usually surrounds debates on natural resources. As Bernard Mommer argued more than twenty years ago, the governance of natural resources is, in many ways, a more elementary question than the conventional left-right divide suggests. In the case of oil and minerals, the deeper divide is above versus below. It is the tension between those who live and work on the surface (the nation, society, the public realm) and those who make their living from the subsoil.

That is why the question of ownership comes before the question of distribution, that is, before the question of what is done with the income generated by oil activity. Only after establishing the governance over the resource and the rules over its extraction does the familiar left-right question properly arise: how that income is used, whether for social spending, public services, etc., or private accumulation. 

The first step, then, is transparency. Not as a slogan, but as an institutional obligation. Who is selling? At what net price? Under what discounts? With what deductions? Paid where? Audited by whom? These are not minor administrative questions. They are the very mechanics of sovereignty in an extractive economy. If the country cannot answer them, then the state is no longer exercising full command over its principal source of income.

The second step is to move away from excessive discretion and back towards intelligible general rules. Contracts will always matter in oil. But there is a difference between contracts operating within a strong public framework and contracts effectively replacing public rule. Once everything becomes negotiable in the name of investment or “economic equilibrium,” the public realm shrinks and the executive realm expands. That is politically dangerous in any country, but especially in one where oil historically underpinned a broader social pact.

The third step is to reconnect oil income with social legitimacy. This is not an abstract issue. It is whether oil wealth translates to salaries, living standards, public services, social protection, and some minimum sense of collective benefit. If the country enters a new extractive cycle in which more oil is produced but public income remains narrow, opaque, or externally conditioned, then social tensions are likely to intensify rather than diminish. That is why a sovereign recovery cannot be measured by production figures alone. It must be judged by whether the nation regains an intelligible and legitimate claim over the income stream.

In simple terms, the average Venezuelan citizen is aware of fluctuations in crude prices because they know they affect the national budget. Oil income is widely and legitimately perceived as income belonging to the nation, and therefore as something that ought to support public services and collective welfare. Even when that income is later misused (through corruption, clientelism, or mismanagement) the underlying perception remains: oil revenue belongs to all Venezuelans.

That is also why the current situation can be described as one of sovereignty under tutelage. The country may still be sovereign in formal terms, yet it operates under external supervision in practical terms. Unless that gap is closed, the language of recovery will remain politically fragile.

Blas Regnault is an oil market analyst and researcher based in The Hague, whose work explores how oil prices move across time and what they tell us about the global economy. Drawing on years of experience in central banking, energy research, and international consulting, he brings together political economy, business cycles, production costs, and petroleum governance in a way that is both rigorous and accessible.

He has spent much of his career studying the deeper forces behind oil price trends and fluctuations, always with an eye on the institutional and geopolitical realities of the global petroleum market. Later this year, he will publish his book, Political Economy of Oil Prices: Trends and Business Cycles in the Global Petroleum Market, with Routledge.

The views expressed in this article are the author’s own and do not necessarily reflect those of the Venezuelanalysis editorial staff.

Published on
04/05/2026 – 7:15 GMT+2

Crude prices were slightly lower ahead of European markets opening as traders digested comments from US President Donald Trump that Washington would help ships leave the Strait of Hormuz from today. Iran, however, has rejected the plan.

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At the time of writing, the price of a barrel of US benchmark crude (WTI) was down 0.28% to $101.65 a barrel, while Brent crude, the international standard, edged down 0.06% to $108.10 a barrel.

Much hinges now on progress towards ending the war with Iran and unlocking the bottleneck through the Strait of Hormuz.

The oil market “remains the fulcrum, with hundreds of tankers, bulk carriers, and cargo ships still stranded across the Gulf, idling as storage constraints force producers to shut … production simply because there is nowhere left to store it,” Stephen Innes of SPI Asset Management said in a commentary note.

Trump said what he called “Project Freedom” would begin Monday morning in the Middle East. The US Central Command said it would involve guided-missile destroyers, more than 100 aircraft and 15,000 service members, but the Pentagon did not immediately answer questions about how they would be deployed.

Asia-Pacific and US markets

In Asian share trading overnight, Hong Kong’s Hang Seng jumped 1.4% to 26,135.47. Markets in mainland China and Japan were closed for “Golden Week” holidays. In Australia, the S&P/ASX 200 slipped 0.3% to 8,704.70.

Strong buying of tech stocks pushed shares in South Korea sharply higher, as the Kospi gained 3.8%. Taiwan’s Taiex surged 4.2%.

On Friday, the S&P 500 climbed 0.3% to another all-time high of 7,230.12, closing out a fifth straight winning week. The Dow Jones Industrial Average dipped 0.3% to 49,499.27, and the Nasdaq composite added 0.9% to a record close of 25,114.44.

Apple led the way after delivering better profit than expected. Because it’s one of Wall Street’s biggest stocks in terms of overall size, its rally of 3.3% was by far the strongest force lifting the S&P 500.

Stock prices generally follow the path of corporate profits over the long term, and US companies have been exceeding expectations for earnings in the first three months of 2026. That’s even with the war with Iran and high oil prices souring confidence for many US households.

Strong earnings boost S&P 500

A little more than a quarter of the companies in the S&P 500 have reported already, and 84% of them have topped analysts’ estimates, according to FactSet. The index is on track to deliver roughly 15% growth in profit from a year earlier.

The main uncertainty for the global economy is where oil prices are heading because of the Iran war. Oil prices moved higher last week on worries that the war might keep the Strait of Hormuz closed for a long time, trapping oil tankers pent up in the Persian Gulf instead of delivering crude to customers worldwide.

Brent was selling for a little more than $70 per barrel before the war began, and soaring prices helped the two biggest U.S. oil companies report stronger profit for the latest quarter than analysts expected. But stock prices nevertheless fell for both Exxon Mobil, 1%, and Chevron, 1.4%, as oil prices regressed Friday and each reported drops in net income from a year earlier.

In other dealings early Monday, the dollar rose to 157.18 Japanese yen from 156.80 yen. The euro fell to $1.1724 from $1.1746.

May 3 (UPI) — Oil exports from the United States have increased by more than 30% the U.S.-Israeli war in Iran started and the Strait of Hormuz was blockaded in response.

The Port of Corpus Christie has overtaken the ports in Saudi Arabia and Iraq in the last few weeks as the two Persian Gulf ports have been cut off from the rest of the world since the Strait has been blockaded.

Over the past two months, the United States has sold more than 250 million barrels of oil to foreign buyers as exports have increased by 30%, from 3.9 million barrels per day in February to 5.2 million barrels per day in April, Bloomberg and CNBC reported.

Experts have warned, however, that domestic oil inventories are depleting stockpiles and there is a question of how long the country will be able to continue replacing oil on the market that is stuck in the Strait.

Although selling oil is good for business, oil producers are struggling to keep up with the demand and it is possible that selling so much could have an add-on effect of pushing gas prices for American consumers even higher than they have gone since the war started.

“Ships are coming to take our oil, but once significant volumes of are leaving the United States, it can be expected that balances will tighten,” Clayton Seigle, senior fellow at the Center for Strategic and International Studies, told Bloomberg.

“We are digging ourselves a hole in terms of spending down inventories,” he said.

Roughly 20% of global oil supplies pass through the Strait of Hormuz and Iran’s shutting of it has caused gas and fuel prices to skyrocket over the last two months, including massive effects on the airline industry, which has seen seen the price of jet fuel double since before the war.

Oil from the United States, Latin America and West Africa could for a short time be a substitute for Middle Eastern oil for countries in Asia, which has been hurt the most, but it is not ideal, Matt Smith, director of commodity research at Kpler, told CNBC.

“Asian markets are buying whatever they can get their hands on, so they’re taking a lot of light sweet [American] crude [oil],” Smith said, but their refineries are optimized for the heavier oil produced in the Middle East.

“It’a hole that can’t be plugged,” Smith told CNBC. “The answer has to be ensuring secure supply from the Middle East.”

[kicker]

Syria is receiving hundreds of Iraqi oil trucks hauling crude overland to its Baniyas port as an alternative energy corridor to Europe, creating a costly but crucial workaround while the Strait of Hormuz is largely blocked by the US-Israeli war on Iran.

WEST PALM BEACH, Fla. — Spirit Airlines, an impish upstart that shook the industry with its irreverent ads and deep discount fares, announced Saturday that it has gone out of business after 34 years.

The ultra-low-cost airline that once operated hundreds of daily flights on its bright yellow planes and employed about 17,000 people said it had “started an orderly wind-down of our operations, effective immediately.”

Although Spirit had gone bankrupt twice before, the company said high oil prices, which have been rising because of the U.S.-Israeli war with Iran, made it impossible to stay aloft.

The airline said on its website that all flights have been canceled and customer service is no longer available.

“We are proud of the impact of our ultra-low-cost model on the industry over the last 34 years and had hoped to serve our guests for many years to come,” the announcement said.

U.S. Transportation Secretary Sean Duffy said Saturday that Spirit had a reserve fund set up for customers who bought directly from the airline to get refunds. People who bought from third-party vendors such as travel agents would have to seek refunds from them. He had a stark message for people flying with Spirit.

“If you have a flight scheduled with Spirit Airlines, don’t show up at the airport. There will be no one here to assist you,” Duffy said.

He said United, Delta, JetBlue and Southwest were offering $200 one-way flights for people who could confirm that they had Spirit confirmation numbers and proof of purchase for a limited time. Duffy also said other airlines would help with Spirit employees who might be stranded and would offer them a preferential application process as they look for work.

Spirit said in a statement that it was working to get more than 1,300 crew members to their home bases and that the final Spirit flight landed early Saturday at Dallas Fort Worth International Airport from Detroit Metropolitan Airport.

The company advised customers that they could expect refunds but there would be no help in booking travel on other airlines.

The Trump administration had considered a government bailout for the cash-strapped business to keep it from going under, but a deal was not reached. Of the potential bailout, Duffy said Saturday that “we oftentimes don’t have half a billion dollars laying around.”

President Trump had floated the idea of a bailout last week after the airline found itself in bankruptcy proceedings for the second time in less than two years with jet fuel prices soaring since the start of the Iran war.

‘They get you there’

Five Spirit flights were still showing as “on time” on Saturday morning on the departure board in Atlanta. A trickle of passengers who hadn’t heard the news were still showing up.

“What!?” exclaimed Taylor Nantang as she, her husband and four children arrived for a Saturday afternoon Spirit flight from Atlanta to Miami for a spur-of-the-moment vacation. The family had driven down from Tennessee to the Atlanta airport.

“So the whole airline at every airport is out of business?” asked Nantang. “Oh my, that’s crazy.”

Other passengers wondered whether the airline would still answer its customer service phone, or when the refunds for canceled flights might arrive on their credit cards.

Joshua Sigler, who had bought a ticket Friday for a flight Saturday to Miami, said he would just return home after learning of the cancellation rather than try to take advantage of deals other airlines were offering to stranded Spirit passengers. He said he had gotten no communication from Spirit, which he had flown multiple times in the past.

“They get you there,” he said of his Spirit travels. “It was cheap.”

Waking to the news

Former Spirit flight attendant Freddy Peterson was on a Spirit flight from Detroit that arrived in Newark, N.J., around 11 p.m. Friday. He said that despite rumors flying on social media Friday, things seemed kind of normal, with more than 200 passengers on the plane.

“All our aircraft were packed,” he said.

Peterson, 60, said he set his alarm clock for 3 a.m. Saturday to check the company website at the hour of the rumored shutdown and learned all Spirit flights were canceled. He said Delta Air Lines brought him and another flight attendant back to Atlanta on Saturday morning, with Peterson leaving from there to drive to his home in Shellman in southwest Georgia.

“I’ll probably do my boo-hoo crying and all that other stuff once I get in the car.”

Peterson said he had been a flight attendant with Spirit for 10 years and the company has “done wonders for me.” He said the airline’s reputation for bargain-basement chaos was largely undeserved, but he did fault management for not communicating with the employees in the closing days, saying a promised employee town hall was canceled.

Bailout fizzles

As late as Friday afternoon, Trump had said his administration was looking at a bailout for Spirit and had given the budget carrier a “final proposal” for a taxpayer-funded takeover.

Spirit proudly disrupted the penny-pinching portion of the airline industry with its no-frills, low-cost flights and provocative ads like its “Check Out the Oil on Our Beaches” campaign after the Deepwater Horizon disaster in 2010, referencing suntan oil but alluding to the massive spill of crude along the Gulf Coast.

But Spirit has struggled financially since the COVID-19 pandemic, weighed down by rising operating costs and growing debt. By the time it filed for Chapter 11 protection in November 2024, Spirit had lost more than $2.5 billion since the start of 2020.

The budget carrier sought bankruptcy protection again in August 2025, when it reported having $8.1 billion in debts and $8.6 billion in assets, according to court filings.

White House blames Biden

The White House had blamed the Biden administration for Spirit’s tenuous financial situation, noting that President Biden opposed a proposed merger between Spirit and JetBlue in 2023. On Saturday, Trump administration officials took to social media to amplify voices of conservative critics who faulted that decision.

On Saturday, Duffy concentrated blame on Biden as well as Duffy’s predecessor, Pete Buttigieg. “Many at the time said that this was a disaster. This merger should have been allowed,” he said.

Tad DeHaven, a policy analyst at the Cato Institute, a libertarian think tank, said the Trump administration also bears responsibility, arguing that the airline’s latest crisis reflected a chain reaction of policy missteps rather than a single decision. He pointed specifically to Trump’s decision to strike Iran as “bad foreign policy,” noting the conflict drove up jet fuel prices and therefore Spirit’s operating costs.

“They were already in trouble,” DeHaven said, describing the situation as “a compounding effect in terms of policy.”

Supporters of a rescue including labor unions representing Spirit’s pilots, flight attendants and ramp workers said a collapse would put thousands of Americans out of work and hurt consumers by reducing airline competition and increasing airfares. About 17,000 jobs could be impacted, according to Spirit lawyer Marshall Huebner.

Budget-conscious and leisure travelers are likely to feel Spirit’s absence the most, especially in places where the airline has a big footprint such as Las Vegas and the Florida cities of Fort Lauderdale and Orlando.

The carrier flew about 1.7 million domestic passengers in February, roughly half a million fewer than during the same month a year earlier, according to aviation analytics firm Cirium. Spirit also has sharply reduced its capacity; about half as many seats had been available this month as in May 2024.

Madhani, Yamat, Amy and Catalini write for the Associated Press and reported from West Palm Beach, Las Vegas, Atlanta and Morrisville, Pa., respectively. AP writer Josh Funk in Omaha contributed to this report.

Donald Trump says US forces are ‘like pirates’ taking over Iranian ships and cargo near the Strait of Hormuz. The US is maintaining a blockade of Iran’s ports and has seized at least three Iranian flagged vessels.

May 1 (Asia Today) — More than 73% of people eligible for South Korea’s first round of high oil price relief payments have applied, government data showed Friday.

The Ministry of the Interior and Safety said 2,358,682 people had applied as of midnight Thursday, accounting for 73.1% of the 3,227,785 people eligible in the first round.

The government has paid a total of 1.3413 trillion won ($910 million) in relief funds, or about 570,000 won ($387) per person.

The first round covers vulnerable groups, including basic livelihood security recipients, near-poverty households and single-parent families.

By payment method, credit and debit cards were the most common choice, used by 984,209 applicants, or 41.7%. Prepaid cards accounted for 814,056 applicants, followed by mobile or card-type local gift certificates at 493,254 and paper gift certificates at 67,163.

By region, South Jeolla Province had the highest application rate at 79.3%, followed by Busan at 77.7%, Gwangju at 76.9%, North Jeolla Province at 76.2% and Ulsan at 76%.

Applications remain open through May 8.

— Reported by Asia Today; translated by UPI

© Asia Today. Unauthorized reproduction or redistribution prohibited.

Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260501010000031

The withdrawal of the United Arab Emirates to abandon OPEC is far more than just a change in policy, but represents a change in the paradigm of worldwide energy governance. In a region that, already, has been influenced in oil market operations by geopolitical frictions, climate changes, and alliances, the UAE action begs an immediate question: is the era of shared oil control becoming one of autonomy of choice?

OPEC had been a mainstay of oil prices globally. Through the coordination of production quotas, the member states were trying to control supply and manipulate prices. Nevertheless, the emergence of non OPEC producers, especially the United States of America with its own shale revolution and the increasing influence of Russia could have calories undermined the power of OPEC. Responding, the organization became OPEC+, a more wide-ranging alliance that tried to reassert itself by coordinating more.

But with this change, new fault lines were also presented. OPEC+ is not a close bloc, but an adaptable arrangement anchored on overlapping, and indeed competing, interests. Its success largely relies on the collaboration of key actors such as the Saudi Arabia and Russia countries having different geopolitical interests. Such delicate equilibrium has rendered the sustainability of cohesion even more of a challenge.

It is here that the withdrawal of the UAE is noteworthy. Abu Dhabi has been rethinking its economic and strategic priorities. Although oil is still significant, UAE has been spending on renewable energy, international financial and logistics as well as technology. It has a long term vision of diversification and global competitiveness rather than oil dependency.

These goals might not have been consistent with staying within OPEC quota system. Designed to stabilize the prices, production limits may limit the capacity of a country to operate at capacity or flexibly respond to market opportunities. Like any exit, the UAE will have more flexibility in its output policy, which will enable it to harmonize the national economic objectives with energy policy.

This is indicative of a larger conflict over collective discipline and national sovereignty. The success of OPEC has been pegged on compliance with quotas by its members. But when the economic priorities move apart, they are more difficult to maintain. The UAE motion indicates that in some cases the advantages of independence can now surpass the benefits of action.

This is reflected in this concept of OPEC 2.0. The basic model is also more fluid and pragmatic compared to its predecessor, which was more or less a cohesive cartel. It is based on momentary agreements, but not the institutional unity. Although this flexibility maybe handy when dealing with a crisis in the short term, it also casts an element of stability in the long term.

Should other producers start to emulate the UAE, the effects may be far reaching. A disintegrated system can have difficulties in controlling supply even more resulting into a greater price volatility. The global markets would, in that case, not be fueled by coordinated policy but rather competition among the producers.

Simultaneously, the move that the UAE made should not be construed as a total denial of collaboration. Energy diplomacy is not going away but changing. Nations can move towards selective and form partnerships depending on similar interests as opposed to unbreakable unions. This would result in a more energetic yet unpredictable energy environment.

The decision is also representative of a larger trend in the Middle East geopolitically. States in the Gulf are claiming to be more independent economically and in the foreign policy. They havebbeen diversifying collaborations, looking into new spheres, and establishing themselves as international centres of commerce and innovation. Energy policy is evolving merely as a part of a broader strategic approach.

To people worldwide, the ramification is ambivalent. In the short run, on the one hand, a decrease in coordination among the producers may result in instability in the market and price variations. Conversely, over competition can lead to efficiency and speed up investment in alternative power sources. This might promote the movement of the world towards non fossil fuels in the long run.

Finally, the UAE withdrawal is a turning point. It highlights a transition into the flexible interestdriven strategies including strict institutional structures. There is a growing challenge of a more complicated and multipolar reality to the classical structure of oil governance with its emphasis on unity and joint control. The future of the global energy could probably not be characterized by one powerful protagonist, but a system of changing alliances and strategic choices. The adaptability in this new order can become important than unity. The UAE has decided to take that direction and their move might potentially determine the next chapter of energy politics across the world.

Despite efforts to rebuild ties with Western nations, Syria remains heavily dependent on Russia for its oil supply. Since the fall of Bashar al Assad in late 2024, shipments from Russia have surged, making Moscow the primary supplier of crude to Syria.

This shift comes even as the new government in Damascus seeks closer alignment with Europe and the United States. The contradiction highlights the economic constraints facing a country still recovering from years of war and isolation.

Rising Dependence on Russian Oil
Russian oil exports to Syria have increased significantly, now covering a large portion of the country’s energy needs. Domestic production remains far below demand, leaving Syria reliant on imports to sustain basic economic activity.

Before 2025, Iran had been Syria’s main supplier, but that relationship ended following political changes in Damascus. Russia quickly stepped in, becoming the first to resume large scale shipments after the leadership transition.

Limited Alternatives and Structural Weakness
Syria’s options remain extremely limited. Years of conflict have weakened its economy, reduced purchasing power, and restricted access to global financial systems. Even after the easing of Western sanctions, integration into international markets remains slow and incomplete.

Efforts to secure alternative suppliers, including potential deals with regional partners such as Turkey, have so far failed. This leaves Russian supply networks as the most accessible and reliable option in the short term.

Sanctions Risk and Diplomatic Tension
Reliance on Russian oil poses significant risks for Syria’s foreign relations. Continued trade with Moscow could strain ties with Western governments and expose Syria to renewed sanctions, particularly if geopolitical tensions escalate.

The situation is further complicated by Russia’s ongoing military presence in Syria, including key naval and air bases. These assets give Moscow continued influence over the country’s strategic direction.

Opaque Supply Chains and Sanctioned Networks
Much of the oil trade is conducted through complex and opaque shipping networks. Tankers linked to sanctioned entities frequently deliver crude to Syrian ports, often using ship to ship transfers to obscure the origin of cargo.

These methods reflect both necessity and constraint. Syria’s exclusion from conventional shipping and financial systems has pushed it toward alternative networks that carry reputational and legal risks.

Supply Gap and Energy Reality
Syria’s domestic oil production remains a fraction of pre war levels, while demand continues to exceed supply. Russian shipments now fill a significant portion of this gap, alongside smaller volumes obtained through informal or regional channels.

This dependency underscores the difficulty of rebuilding an energy sector after prolonged conflict, particularly without strong international investment or infrastructure support.

Analysis
Syria’s reliance on Russian oil reveals the limits of political realignment when economic realities remain unchanged. While Damascus may seek closer ties with the West, its immediate survival depends on securing energy supplies, and Russia is currently the only actor able and willing to meet that need at scale.

For Moscow, the relationship offers continued leverage in Syria despite the fall of its former ally. Energy supply becomes a tool of influence, allowing Russia to maintain a strategic foothold even as political dynamics shift.

At the same time, the arrangement creates long term risks for Syria. Dependence on sanctioned networks could undermine efforts to rebuild credibility with international partners and attract investment. It also leaves the country vulnerable to external pressure, particularly if Western governments decide to enforce stricter controls on Russian energy flows.

Ultimately, Syria is caught between geopolitical ambition and economic necessity. Until it diversifies its energy sources and strengthens its economic foundations, its foreign policy choices will remain constrained by the basic need to keep fuel flowing.

With information from Reuters.

Chris Weafer, the CEO of Micro-Advisory Partners, says the UAE’s OPEC exit frees one million barrels of spare capacity. He warns Kazakhstan and Venezuela may follow, leaving OPEC far less influential on global oil pricing.

The conflict involving Iran and the disruption of the Strait of Hormuz have shaken global energy markets. Supply constraints and extreme volatility have driven oil prices sharply higher, exposing a growing structural divide in how major oil companies operate across the Atlantic.

European majors profit from trading strength
Companies such as BP, Shell, and TotalEnergies have benefited from strong oil trading performance. Their global trading networks allow them to move crude and refined products across regions, taking advantage of price differences created by supply disruptions.

These firms trade volumes far exceeding their own production, turning volatility into profit. In the current crisis, trading has significantly boosted earnings, offsetting weaker performance in other segments.

Volatility creates both gains and exposure
The sharp rise in Brent crude prices and market instability has created lucrative arbitrage opportunities. Companies have rerouted fuel shipments across longer and unusual routes to capture higher margins.

However, these strategies come with risks. Trading at such scale requires large amounts of capital, and holding cargoes for extended periods increases financial exposure if market conditions shift.

Trading as a shock absorber
For European majors, trading divisions have acted as a buffer during the crisis. Losses from disrupted production or regional exposure have been partially offset by gains in trading, highlighting the strategic importance of these operations in volatile markets.

US majors rely on production strength
In contrast, Exxon Mobil and Chevron focus primarily on large scale oil and gas production. Their output significantly exceeds that of European rivals, giving them a strong advantage when prices rise.

While they have more limited trading operations, their upstream strength allows them to generate substantial cash flow in high price environments without relying heavily on market arbitrage.

Structural differences in strategy
The divergence reflects long term strategic choices. European companies invested more heavily in renewables and diversified energy portfolios, which limited growth in their upstream production. US firms, by contrast, maintained a strong focus on expanding oil and gas output.

As a result, European majors depend more on trading to drive returns, while US majors depend on production scale.

Analysis
The Iran war has highlighted a clear split in the global energy industry between trading focused and production focused business models. European majors have shown that strong trading capabilities can generate significant profits during periods of disruption, effectively turning volatility into an advantage.

However, this model is inherently unpredictable. Trading gains depend on market conditions and may not be sustainable if volatility declines. In contrast, the US model offers more stable returns tied directly to production levels and commodity prices.

In the long term, this divide could shape investor perceptions and valuations. If European companies continue to rely heavily on trading while lagging in production, the gap between them and US rivals may widen. The industry is increasingly defined by a fundamental question: whether it is more profitable to move oil around the world or to produce it at scale.

With information from Reuters.

April 30 (UPI) — Oil prices briefly topped $126 a barrel in Asian trade overnight as markets reacted to news the United States might resume its military offensive against Iran and fears the Hormuz Strait might remain closed for much longer than anticipated.

Brent crude, the global benchmark, surged to $126.31, its highest level since Russia invaded Ukraine in 2022, after a report that U.S. military commanders were pitching a campaign of “short and powerful” strikes to U.S. President Donald Trump, to force Iran back to the negotiating table.

The price retreated to around $120 by the time markets in Europe opened on Thursday and continued to fall through the morning. The Brent contract for June delivery was trading at $113.91 a barrel in mid-afternoon trade in London, while American crude for June delivery was changing hands at $104.82.

Oil prices have already elevated since the war began on Feb. 28 and began climbing further on Wednesday after Trump met with executives of U.S. oil companies the previous day about how to deal with supply disruption from the closure of the Strait of Hormuz by Iran, which has vowed it will continue until the United States’ blockade of its ports is lifted.

The group discussed “steps we could take to continue the current blockade for months if needed and minimize impact on American consumers,” a White House official said.

Around 25% of the world’s oil supply passes through the strait and the prospect of it remaining effectively closed for months has set alarm bells ringing in markets as traders’ faith in an early resolution fades and “the reality of the supply situation” sets in.

“The breakdown of talks between the U.S. and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows,” said William Patterson, ING’s Singapore-based head of commodities strategy.

Trump has said he believes the regime in Tehran will blink first, saying they were less afraid of the bombing than the blockade, with U.S. officials banking it will force Iran to shutter oil production because the oil has nowhere to go and the country lacks sufficient storage facilities.

Published on 30/04/2026 – 10:17 GMT+2•Updated
10:28

Brent crude, the international standard for oil prices, jumped by over 7% during early trading on Thursday, touching $126 per barrel, the highest intraday level since 2022 when Russia initiated the full-scale invasion of Ukraine.

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The US benchmark crude, WTI, also rose more than 3% and hit over $110 per barrel.

At the time of writing, prices have corrected slightly with the front month contract for Brent trading at around $122 per barrel and WTI at roughly $108.5.

Prices are now the highest they have been since the start of the Iran war.

The surge in oil prices is a direct consequence of stalled negotiations over the reopening of the Strait of Hormuz, the absence of a clear path toward ending the war and a seemingly increased chance of US-Israeli military action returning.

US President Donald Trump is set to meet with the head of the US Central Command, Admiral Brad Cooper, on Thursday and receive a briefing on new military options for action in Iran, according to Axios which cites two unnamed people.

The meeting signals the potential for fresh escalation in the Middle East as the resumption of combat operations is reportedly “seriously under consideration” and oil markets have reacted swiftly to the news.

A ceasefire has held since early April but recent negotiating efforts have fallen flat with the two sides refusing to meet. Meanwhile, the US and Iran both maintain their blockade of the vital Strait of Hormuz.

US Central Command has also reportedly asked for hypersonic missiles to be sent to the Middle East, which would mark the first time the US army has deployed that type of weapon.

The persistent blockade of ports and the threat of expanded combat have fundamentally reshaped market expectations.

A shifting landscape for OPEC and global supply

The spike in prices is occurring against a backdrop of significant structural change within the global oil hierarchy.

Earlier this week, the United Arab Emirates officially withdrew from the Organisation of the Petroleum Exporting Countries (OPEC) and its wider alliance (OPEC+), a move the nation claimed was necessary to prioritise its own national interests.

Under normal market conditions, the exit of a major producer from the cartel might be expected to signal a potential increase in supply or a decrease in price stability.

However, the sheer scale of the Iran war has rendered the UAE’s departure secondary in the minds of traders.

Despite the UAE’s exit, which was expected to potentially weaken OPEC’s grip on production quotas, prices have continued their upward trajectory.

This suggests that the “war premium” currently dominates all other market fundamentals.

Investors are currently less concerned with the internal politics of oil-producing nations and more focused on the immediate physical absence of Iranian crude, suspended shipping routes through the Strait of Hormuz and the threat to regional infrastructure.

However, the transition of the UAE to an independent actor still highlights a growing fragmentation in global energy governance at a time when the world’s energy security is at its most vulnerable.

Fifty-nine years of membership, ended with a statement on a Tuesday and an effective date of Friday. The United Arab Emirates announced it will exit OPEC and OPEC+ on May 1, citing national interests, its evolving energy profile, and a long-term strategic vision that no longer aligns with the organization’s direction. The Energy Minister did not consult Saudi Arabia before making the announcement. He did not raise the issue with any other member country. He simply said the time had come. 

The timing tells the whole story. OPEC was preparing to meet in Vienna on Wednesday when the news landed. The Iran war had already wiped out 7.88 million barrels per day of OPEC’s production in March alone, resulting in the biggest supply collapse for the producers’ group in recent decades, surpassing even the 2020 Covid shock and the 1970s oil crisis. The UAE had been absorbing Iranian drone and missile attacks for weeks. The Strait of Hormuz, through which the UAE ships its own oil, has been functionally closed or severely restricted since early March. And sitting across the OPEC table was Iran, the country that had been targeting UAE infrastructure repeatedly, and Russia, which had been a steadfast partner to Iran throughout the conflict.

Walking out was not an impulsive decision. It was the logical conclusion of a calculation that had been building for years.

Why Abu Dhabi Was Already Done With OPEC 

The UAE’s frustration with OPEC production quotas is not new. The quotas have capped UAE output at around 3.2 million barrels per day, while the country has the ambition and the capacity to produce closer to 5 million barrels per day by 2027, suggesting production could almost double without OPEC’s constraints. For a country that has invested heavily in expanding ADNOC’s capacity and has the infrastructure to back it up, being told by a cartel committee how much it can produce has become an increasingly poor trade. 

The UAE’s sovereign wealth fund is so large that its economy is now more significantly tied to global economic growth than to the global price of oil. That shift in economic identity matters enormously for understanding why OPEC membership has become structurally uncomfortable. OPEC exists to keep oil prices elevated through production discipline. The UAE increasingly benefits from a growing global economy that demands more energy, more investment, and more trade, all of which are better served by producing at full capacity and building relationships with the countries that need what Abu Dhabi has to sell. 

An energy industry source familiar with the decision said the UAE felt it was “the right time to leave” and that “this decision is good for consumers and good for the world,” adding that the UAE would gradually increase production to supply global markets once freedom of navigation is restored in the Strait of Hormuz. The framing is deliberate. The UAE is not positioning itself as a cartel defector but as a responsible producer responding to a global energy emergency, which is a considerably more defensible diplomatic position. 

The Saudi Rupture Running Underneath It All

The official UAE statement was carefully worded, full of appreciation for “brothers and friends within the group” and “the highest respect for the Saudis for leading OPEC.” None of that diplomatic courtesy changes the underlying reality, which is that the UAE and Saudi Arabia have been on a collision course for some time and the OPEC exit is the most visible expression of that tension yet.

The two countries had joined a coalition to fight the Houthis in Yemen in 2015, but that coalition broke down into open recriminations in late December when Saudi Arabia bombed what it described as a weapons shipment bound for UAE-backed Yemeni separatists. That incident was the visible rupture of a relationship that had been quietly fraying for years over economic competition, differing visions for regional leadership, and diverging approaches to normalization, China, and the post-war order. Within OPEC, the two countries have clashed repeatedly over quota allocations, with the UAE consistently arguing it deserves a larger share based on its expanded capacity. 

The OPEC exit does not resolve any of those tensions. It sidesteps them entirely, which is probably the more elegant solution. By leaving, the UAE removes itself from a framework where Saudi Arabia holds dominant influence and gains the freedom to pursue its own production and partnership strategy without needing Riyadh’s agreement. That is a significant shift in the regional power dynamic, and it happened without a single confrontational statement.

What Remains of OPEC Now 

The UAE’s exit could prompt other members to follow suit, with analysts pointing to Kazakhstan as another significant producer that wants to grow beyond its current quota constraints. “If there is a time to leave, now is the time,” one Dubai-based energy consultant told CNN. 

The cartel’s power has always rested on a specific mechanism: spare production capacity held back from the market to stabilize prices. That spare capacity is concentrated almost entirely in the UAE, Saudi Arabia, and Kuwait, with the other nine member countries possessing little to none. Removing the UAE from that equation means OPEC’s effective spare capacity narrows considerably, and the burden of price stabilization falls almost entirely on Riyadh and Kuwait City. Saudi Arabia will hold an even greater share of the cartel’s remaining leverage, but leverage over a smaller and weaker institution is not the same as leverage over a healthy one.

OPEC has lost members before, but the UAE is a much larger producer than previous departures, and its absence may over time pose an existential risk to the cartel’s sustainability. The organization that has shaped global energy politics since 1960 is now facing its most significant structural test, and it is doing so while simultaneously dealing with a historic supply shock from the Iran war, a closed strait, and a global economy pricing in the possibility that the disruption is not temporary. 

The Geopolitical Implications

Freed from production quotas, the UAE’s most immediate strategic move is likely to deepen its relationship with the countries that need its oil most urgently, and China sits at the top of that list. More production could help the UAE improve ties with oil-importing partners such as China, and given the economic damage caused by the Iran war, the prospect of maximizing energy revenues now is undoubtedly attractive to Abu Dhabi. 

The UAE-US relationship also stands to benefit. With the UAE free to leverage its spare capacity in pursuit of its own strategic interests, the move will likely strengthen the UAE-US relationship, particularly in relation to managing the strategic petroleum reserve and responding to the ongoing Hormuz supply shock. Trump has been publicly critical of OPEC for years, accusing the cartel of exploiting American military protection to keep prices artificially high. An OPEC that is smaller and weaker, with a major member now operating independently and aligned with US interests, is a more congenial arrangement from Washington’s perspective. 

For the global energy market, the picture is more complicated. Once the Strait reopens fully and UAE production ramps up without quota constraints, additional supply should exert downward pressure on prices that have been elevated since February. Whether that actually happens depends on a sequence of events, including a durable Iran settlement and the restoration of free navigation through Hormuz, that are still very much in progress.

Our Take: A Geopolitical Move Dressed as an Energy Decision 

The UAE’s OPEC exit is not primarily an energy story. It is a geopolitical statement about where Abu Dhabi sees itself in the emerging regional order, and the answer is: outside the frameworks that no longer serve its interests, and free to build the bilateral relationships that do. The exit from OPEC follows the same strategic logic as the Abraham Accords, the Huawei contracts, the US base agreement, and the China infrastructure ties. The UAE has been running a multi-alignment strategy for years, positioning itself as indispensable to every major power simultaneously, and OPEC membership was becoming a constraint on that strategy rather than an asset.

What happens to OPEC matters for energy markets in the short term. What the UAE’s departure signals about the fracturing of Gulf institutional solidarity matters considerably more for the regional order that everyone in the Middle East is trying to rebuild in the aftermath of a war that nobody fully planned for and nobody has yet fully ended.

The deeper story is what the UAE’s exit reveals about the post-war Middle East taking shape right now. The institutions that governed the region’s energy politics, security arrangements, and diplomatic alignments for decades were built in a different world, one where the Cold War defined choices, where oil producers had unified interests, and where the US sat at the center of every meaningful regional framework. That world is gone. What the Iran war accelerated, and what the UAE’s OPEC exit makes structurally visible, is that the Gulf’s most capable states are no longer willing to subordinate their individual strategic interests to collective frameworks that were designed for a regional order that no longer exists. 

Abu Dhabi did not leave OPEC because of a quota dispute. It left because it has decided that in the world emerging from this war, the countries that move fastest, align most flexibly, and free themselves from inherited institutional constraints are the ones that will define what comes next. Whether that calculation proves correct depends on what the Islamabad talks produce, how quickly the Strait reopens, and whether the ceasefire holds long enough for the region to build something more durable than a pause. But the signal Abu Dhabi sent on Tuesday was unmistakable, and every government in the region heard it.

Standoff in the Strait of Hormuz is pushing global oil prices above $120 per barrel, with average gas prices in the US hitting a four-year high.