Geopolitical tensions in the Middle East continue to dominate oil markets, with hopes of a near-term breakthrough fading as negotiations remain stalled. Reduced tanker movements through the Strait of Hormuz, security incidents affecting merchant shipping, and ongoing damage to regional energy infrastructure have reinforced concerns about supply reliability. These risks initially pushed crude prices higher, although prices later eased after the announcement of a new sanctions-driven approach that markets viewed as less disruptive than direct military escalation. Even so, uncertainty remains elevated and is likely to keep a risk premium embedded in oil prices.
On the supply side, Saudi Arabia is working aggressively to maintain and expand crude exports despite regional disruptions. Export flows are increasingly being routed through alternative logistics chains, including ship-to-ship transfers and greater use of infrastructure outside the Gulf. These routes are longer and more costly but help sustain deliveries to key consuming regions. At the same time, discussions are continuing around new pipelines, expanded capacities, and alternative export networks designed to reduce dependence on vulnerable chokepoints.
Demand expectations are being reshaped by developments in China. Leading industry figures now suggest the country may have reached peak oil demand earlier than previously anticipated, reflecting the rapid growth of electric vehicles, clean energy adoption, and broader decarbonisation efforts. While supportive economic policies may provide some offset, long-term consumption growth appears increasingly constrained. Nevertheless, China remains heavily dependent on imported crude and is seeking greater diversification of supply sources while maintaining significant links to the Middle East.
In downstream markets, Russia continues to face fuel shortages after sustained attacks on refining infrastructure. Reduced exports, tighter restrictions, and increased fuel imports have constrained availability, although refinery repairs and stronger government intervention could gradually improve supply conditions in the coming months.