As the May West Texas Intermediate futures contract heads into its final months of trading, the crude oil complex navigates an unusually volatile backdrop of geopolitical risk and predictable seasonal demand patterns. At the forefront of price drivers is the ongoing conflict involving the United States, Israel, and Iran, which has injected a meaningful geopolitical risk premium into crude valuations.
In late February and early March, a series of joint U.S. and Israeli military strikes on Iranian targets, coupled with Iranian retaliatory attacks on regional infrastructure, dramatically heightened concerns over oil supply security. The Strait of Hormuz, a critical route for roughly 20% of global seaborne crude (Brent crude) and 19% of LNG, has experienced a near-halt in commercial traffic. Following heightened tensions and threats, many tankers halted, diverted, or reversed course, with several major shipping companies pausing operations.
