Brent crude exceeds $113 amid Middle East crisis
Oil prices surged sharply after the resumption of active hostilities in the Middle East. Brent futures are trading around $113.5 per barrel, and analysts believe that without de-escalation, prices will not fall below $110.
Brent at $113: price shock as a mirror of geopolitical catastrophe
Introduction
On May 4, 2026, Brent crude futures settled above $113 per barrel, marking a new phase of the energy crisis of man-made military-political origin. The sharp price spike was a direct consequence of the resumption of active hostilities in the Middle East and the effective paralysis of shipping in the Strait of Hormuz. It is important to emphasize that the current rise in prices is not the result of a fundamental imbalance between supply and demand in the classical sense, but solely a "fear premium" multiplied by the disruption of supply chains. While analysts previously expected a gradual decline in prices in the second half of the year to $80–85 per barrel, reality now dictates a fundamentally different scenario: without de-escalation of the conflict between the US and Iran, prices will not fall below the $110 mark.
Event details and timeline
The trading dynamics on May 4–5 reflect extreme market nervousness. Monday's trading opened on a relatively calm note thanks to a statement by President Donald Trump about the launch of Operation "Project Freedom" to provide military escort for merchant ships through the Strait of Hormuz—this briefly pushed Brent below $106 per barrel. However, optimism evaporated instantly as reports of Iran's retaliatory actions emerged.
The chronology of price impulses is as follows: after news that the Iranian Navy fired warning missiles at a US patrol vessel in the Gulf of Oman, the market made its first sharp upward jump. The second, more powerful impulse followed confirmation from the UAE Ministry of Defense of the interception of Iranian ballistic missiles over its territory and a fire at a petrochemical facility in the port of Fujairah. In evening trading on May 4, July Brent futures reached $115 per barrel—a gain of almost 8.5% in a single session.
By the morning of May 5, a slight technical correction to $113.47 per barrel occurred against the backdrop of a single US Navy success: Danish company Maersk confirmed that its vessel Alliance Fairfax, under the US flag, transited the strait under military protection. Nevertheless, KCM Trade analyst Tim Waterer characterized this as "an isolated case, not a full restoration of shipping." Crucially, June WTI futures also held above $104 per barrel, confirming the global nature of the price shock.
Impact and significance
The macroeconomic consequences of oil prices staying above $110 per barrel extend far beyond the energy sector. Danske Bank analysts emphasize that rising geopolitical tensions "test the fragile truce, and inflation risks are becoming more pronounced." This means that central banks in developed countries, primarily the Fed and the ECB, find themselves in an extremely difficult position: inflationary pressure from energy prices calls for tighter monetary policy, while the threat of recession dictates the need for easing.
For the global economy, Brent at $113 is a direct blow to consumer demand. As analysts warned even before the May escalation, prolonged prices above $100 per barrel could lead to "demand destruction" and a slowdown in economic activity. According to Goldman Sachs estimates published in late April, the global market has already shifted from a surplus of 1.8 million barrels per day to a deficit of about 9.6 million barrels per day in Q2 2026. Production declines in the Middle East amount to 14.5 million barrels per day, leading to a record reduction in global inventories.
The transportation situation deserves special attention. Seven OPEC+ countries decided to increase production quotas in June by 188,000 barrels per day, but actual increases are impossible until shipping in the Strait of Hormuz is restored. Moreover, the UAE, producing about 3–3.5 million barrels per day, announced its withdrawal from OPEC effective May 1, adding uncertainty to supply coordination prospects. The effect on the average consumer is reflected in rising fuel costs: with oil at $113, retail gasoline prices in the US and Europe will inevitably break through psychological barriers, fueling social discontent.
Reaction of key players
The reaction of market participants demonstrates a classic pattern of behavior under geopolitical shock. Investment banks are urgently revising their forecasts. Danske Research noted that current prices are radically at odds with April expectations—for example, the ECB's Survey of Professional Forecasters had assumed Brent at $94 in Q2, $85 in Q3, and $80 in Q4. Reality has overturned these calculations.
UBS analyst Giovanni Staunovo articulated the key thesis of the moment: "Oil prices will remain on an upward trajectory as long as supplies through the Strait of Hormuz remain constrained." This means the market has stopped responding to fundamental supply-demand balance factors, completely subordinating itself to the logic of military events.
Washington is trying to dampen panic by demonstrating military force. The successful passage of the Maersk vessel under US Navy protection is presented as proof of the effectiveness of Operation "Project Freedom." However, the market reaction—Brent barely dipped below $113—indicates that investors do not believe in the ability of 12 destroyers to ensure the safety of hundreds of merchant ships.
Iran, for its part, uses a tactic of controlled escalation, publishing maps of expanded control zones in the Strait of Hormuz, including the UAE ports of Fujairah and Khor Fakkan. This information background creates an additional "fear premium," which analysts estimate at about $15–20 per barrel above the fundamentally justified level.
Forecast and conclusions
The outlook for oil prices in the coming weeks is determined solely by the development of the military-political situation. The baseline scenario, adhered to by analysts at Euler and Renaissance Capital, assumes an average Brent price of $110 per barrel in Q2, followed by normalization in the second half of the year to levels of $75–80. However, this scenario requires a mandatory condition—de-escalation of the conflict and partial restoration of shipping through the Strait of Hormuz.
A more realistic scenario is the pessimistic one, in which the US military operation drags on and Iran continues attacks on the infrastructure of the Arabian monarchies. In this case, the supply deficit will grow, and Brent prices could test levels of $120–130 per barrel. Dmitry Danilin, portfolio manager at Alfa Capital, admits the possibility of reaching $150 per barrel if the deficit persists at current levels. At the same time, he makes a fundamental caveat: such a price level is not sustainable, as it will inevitably cause "demand destruction" of the very 7–9 million barrels per day that currently constitute the deficit.
The main conclusion from the current situation is that the global economy is facing a phenomenon unique in recent history—a man-made energy crisis unrelated to geological resource depletion or cyclical consumption growth. The Brent price at $113 is not an economic signal, but a direct projection of military actions onto trading terminals. Until diplomacy offers a working ceasefire mechanism, a barrel of oil will cost exactly as much as the fear of tomorrow's news headlines.
— Editorial Team
