Front-month futures for Brent crude declined, while West Texas Intermediate (WTI) experienced significant volatility as a geopolitical deadline approached. June Brent futures settled near $107 per barrel, down approximately 2.75%, after trading near $112 earlier. May WTI futures settled near $112 per barrel, roughly flat on the day but down from a high of $118, while June WTI futures settled around $98.

Market Structure and Price Dynamics

The unusual occurrence of WTI trading at a premium to Brent underscores the critical role of futures curve structure in a tight market. Analysts note that the comparison is between May WTI and June Brent contracts. In a market characterized by extreme backwardation, this one-month difference is significant. The May WTI contract, being more closely aligned with immediate spot market conditions, carries a larger scarcity premium than the June Brent contract, which reflects delivery at a slightly later date. This dynamic highlights buyers' focus on securing immediately available supply, which exerts upward pressure on front-month prices.

Geopolitical Context and the Strait of Hormuz

The market volatility coincided with a deadline set for Iran to reopen the Strait of Hormuz, a critical chokepoint for global oil shipments. Statements indicated severe consequences if the strait remained closed, including hints at targeted infrastructure strikes. In response, a request was made to extend the deadline by two weeks, which was reportedly under review by Iranian officials. However, Iran's representative criticized the deadline comments as irresponsible and alarming. Analyst commentary suggests that while the strait's closure may have started as tactical pressure, Iran increasingly views it as a strategic objective with potential economic benefits, thereby limiting its incentive to fully reopen the passage without a comprehensive ceasefire agreement.

Impact on Oil Flows and Other Markets

The closure has significantly disrupted oil transit. Flows through the Strait of Hormuz fell to roughly 12% of their usual total in March, with a slight increase to 15% noted in April. In related energy markets, futures for the US natural gas benchmark Henry Hub rose 1.3% on the day.