Oil Rises as US Plans Iran Blockade
Oil prices climbed above $110 per barrel amid reports of preparations for a prolonged blockade. This heightens fears of rising global inflation and impacts stock markets, adding arguments for maintaining tight monetary policy.
Introduction
The global oil market is experiencing one of the most dramatic periods in its recent history. On the morning of April 29, 2026, oil prices continued their confident rally, reaching new multi-month highs amid escalating conflict in the Middle East and reports of the US intention to impose a prolonged blockade of Iran. Brent crude futures exceeded $112 per barrel, rising for the eighth consecutive day, while US WTI settled above $100, also showing a seven-day gain. The price increase is a direct consequence of the near-total blockade of the Strait of Hormuz—a strategic corridor through which about 20% of global oil trade passes.
The situation is exacerbated by stalled US-Iran negotiations, with President Donald Trump instructing his aides to prepare for a protracted blockade of Iranian ports. Under these conditions, the market is pricing in not a temporary but a sustained supply deficit, creating serious risks for the global economy. The World Bank has already raised inflation forecasts and lowered GDP growth expectations, especially for developing countries. Against this backdrop, the US Federal Reserve will conclude its meeting on Wednesday, likely forced to tighten its monetary policy rhetoric.
Event Details and Timeline
Oil Price Dynamics
As of the morning of April 29, 2026, oil quotes show steady growth:
| Oil Grade | Price | Daily Change |
|-----------|-------|--------------|
| Brent (June futures) | $112.37 per barrel | +1.0% |
| WTI (June futures) | $100.44 per barrel | +0.51% |
Brent has risen for eight consecutive sessions, and WTI for seven of the last eight trading days. In the previous session, Brent gained $3.03 (2.8%) to $111.26, while WTI added $3.56 (3.7%) to close at $99.93. On the morning of April 29, Brent continued its upward movement, reaching $112.37.
Earlier in April, after the announcement of a truce, prices fell somewhat but remained more than 50% above the start of the year. The peak of the Middle East oil crisis came in late March, when Brent rose to $118 per barrel.
Blockade of the Strait of Hormuz: Timeline
The Middle East conflict leading to the blockade of the Strait of Hormuz began after US and Israeli strikes on Iran on February 28, 2026. By March, oil shipments through the strait had decreased by 10 million barrels per day, marking the largest oil crisis in history.
By the end of April, the situation had not only failed to resolve but had worsened:
- Stalled negotiations. Iran proposed a plan to unblock the strait in exchange for a delay in nuclear talks, but US Secretary of State Marco Rubio indicated that any agreement must preclude Iran from developing nuclear weapons. Qatar warned of the possibility of a "frozen conflict."
- Trump's decision for a prolonged blockade. According to The Wall Street Journal, President Trump instructed his aides to prepare for a long-term blockade of Iranian ports, believing that alternative options (resuming bombings or backing down) pose greater risks for Washington.
Additional Market Pressure Factors
UAE exit from OPEC. On April 28, the UAE authorities announced their intention to leave OPEC and the OPEC+ agreement as of May 1. Officially, the decision is explained by a "comprehensive review of production policy" and "commitment to effectively meeting urgent market needs." Analysts note that the UAE's exit from the alliance will allow the country to increase production beyond current quotas. In the short term, however, realizing this potential first requires resolving the Gulf crisis and restoring free navigation. Some analysts believe the UAE's decision "could undermine group cohesion, create internal chaos, and weaken OPEC+ members' ability to coordinate positions."
Declining US inventories. According to the American Petroleum Institute (API), US crude oil inventories fell by 1.79 million barrels last week, against an expected increase of 300,000 barrels. Even more significant was the drop in gasoline inventories—by 8.47 million barrels—and distillates by 2.6 million barrels. These figures indicate that energy demand remains high, and the strait blockade is already forcing the market to actively use strategic reserves.
Impact and Significance (for the World / Industry / Society)
Global Economy: Stagflation Risks
On April 28, 2026, the World Bank published its Commodity Markets Outlook report, presenting updated forecasts for commodity markets. Key findings paint a troubling picture for the global economy:
- Rising energy prices. In 2026, global energy prices will increase by 24% compared to 2025, reaching highs not seen since 2022. The baseline scenario assumes an average Brent price of $86 per barrel in 2026, up from $69 in 2025.
- Adverse scenario risks. If supply disruptions continue in the coming months or additional infrastructure damage occurs, the average Brent price in 2026 could be $95–115 per barrel.
- Overall commodity price increase. Commodity prices overall will rise by 16% in 2026, fueling inflation and slowing economic growth worldwide.
Developing countries will be the main victims of the current crisis. In the baseline scenario, inflation in this group of countries will rise to 5.1% from 4.7% in 2025, and in the adverse scenario to 5.8%, the highest since 2022. The GDP growth forecast for developing economies has been cut by 0.4 percentage points to 3.6%.
Impact on Stock Markets
On April 28, US stock markets ended lower, with the three major indices down 0.1–0.9%. Profit-taking hit primarily the IT sector and, in particular, stocks related to artificial intelligence development.
Futures on the S&P 500 index were up about 0.2% on the morning of April 29, stabilizing after the previous day's losses. However, investors remain cautious ahead of the Fed meeting, which is likely to deliver a tighter monetary signal for the coming months.
Asian markets showed positive dynamics on Wednesday morning: Chinese indices rose by up to 2%, Hong Kong's Hang Seng gained 1.5%, and South Korea's KOSPI added 0.7%. Japanese exchanges were closed for a holiday. European markets fell the day before: the Euro Stoxx 50 lost 0.4%.
Inflation and Monetary Policy
The current oil shock is putting direct pressure on global inflation. The World Bank notes that the conflict has already resulted in the largest oil crisis in history. Particularly alarming is that the Strait of Hormuz accounted for about 30% of global liquefied natural gas (LNG) trade, with virtually no alternative routes for supplies from Qatar and the UAE. In March, Asian LNG prices rose nearly 94%, and European LNG by 59%.
Fertilizer prices have also come under pressure: the Middle East holds key positions in global ammonia and urea production. The World Bank expects fertilizer prices to rise more than 30% in 2026, with urea alone up nearly 60%.
Under these conditions, central banks worldwide are being forced to reconsider plans to ease monetary policy. Particular attention is focused on the Fed's April 29 meeting, where the rate is expected to remain unchanged at 3.5%–3.75%, but the regulator may deliver a more "hawkish" signal regarding future prospects.
Reactions of Key Players
Analysts and Experts
The professional community unanimously links the current price increase to geopolitical factors.
Yan An, analyst at Haitong Futures: "The recent rise in oil prices was caused by the strait blockade. If Trump is ready to extend the blockade, supply disruptions will intensify and continue to push prices higher."
Stephen Innes, SPI Asset Management: "Iran wants the blockade lifted and export flows restored. Washington holds this lever and is in no hurry to give it up without gaining an advantage. The longer this continues, the more secondary effects begin to manifest. Pressure on storage grows, production risks emerge, and the system begins to experience stress that futures prices cannot ignore."
Elena Kozhukhova, analyst at Veles Capital: "Oil quotes continue to receive support from tensions in the Middle East and reports of the US intention to maintain the naval blockade of Iran."
World Bank
In the Commodity Markets Outlook report, World Bank experts emphasized that the market can only partially mitigate the effects of the oil crisis. Some of the lost volumes are already being redirected through alternative corridors, and part is compensated by strategic reserves and temporarily sanctioned supplies from Russia and Iran. However, there is no talk of fully replacing the oil shipped through Hormuz. If navigation restrictions persist in May, the oil market could face a record deficit of about 3.7 million barrels per day in the second quarter.
Market Participants and Traders
Traders barely reacted to the UAE's decision to leave OPEC in the moment, focusing on more pressing geopolitical risks. However, in the medium term, this decision could destabilize the global oil market, lead to lower prices, and reduce the organization's influence. Additionally, investors await the release of official US Energy Department oil inventory data on Wednesday at 17:30 Moscow time.
Forecast and Conclusions
Short-Term Forecast (Next Days to Weeks)
In the short term, oil prices are likely to remain elevated or continue rising. The key factor remains the progress of US-Iran negotiations. If the stalemate persists and President Trump implements the plan for a prolonged blockade, Brent could test the $115–118 per barrel level. If diplomatic efforts yield progress, a correction is possible, but as experts note, a return to prices below $100 for Brent in the coming weeks is unlikely due to the scale of the accumulated supply deficit.
Medium-Term Forecast (Through End of 2026)
The World Bank's baseline scenario expects the acute phase of the conflict to end in May, with navigation through the Strait of Hormuz gradually restored by October 2026. Under this scenario, the average Brent price in 2026 would be $86 per barrel. In the worst case—a prolonged blockade or additional infrastructure damage—the average price could reach $115 per barrel.
Impact on Monetary Policy
The current oil shock significantly limits central banks' ability to ease monetary policy. At the Fed's April 29 meeting, the rate is expected to remain unchanged at 3.5%–3.75%, but rhetoric may become more "hawkish." Markets will be extremely sensitive to any hints about the rate trajectory and the tone of Jerome Powell, for whom this meeting will be his last as chair.
Conclusions
The oil rally of late April 2026 is not just another price spike but a reflection of a fundamental shift in the global energy market. The blockade of the Strait of Hormuz has created a structural supply deficit that cannot be quickly compensated by strategic reserves or alternative supplies.
For the global economy, this means:
- Accelerating inflation. High energy prices will pass through to the cost of goods and services across the entire value chain.
- Slowing economic growth. Developing countries, most vulnerable to energy shocks, will face lower GDP growth and higher inflation (stagflation).
- Prolonged tight monetary policy. Central banks, including the Fed, will be forced to adopt a more conservative stance, limiting the scope for economic stimulus.
The UAE's exit from OPEC adds uncertainty to the medium term: on one hand, it could lead to increased supply and lower prices; on the other, it undermines coordination among major producers and may increase volatility.
For investors, the current period demands heightened caution. Commodity sectors and companies benefiting from high energy prices appear most protected. Meanwhile, stock markets, especially the high-tech sector, remain vulnerable to both rising energy costs and tighter monetary policy. The coming days, including the Fed meeting and macroeconomic data releases, will be decisive for the further dynamics of both oil and stock markets.
— Editorial Team
