WTI Doubles in Q1, but Can it Last?

The WTI price soared around 98% in Q1 after it recorded its largest monthly gain in history in March, as the war in the Middle East faces a crucial deadline on Tuesday that could mean a massive escalation or finally peace.

The Market-Moving Factors

• Markets are in a holding pattern ahead of Trump's deadline tonight to reach a deal to open the Strait of Hormuz or launch attacks against Iran's energy infrastructure.
• Crude prices remain elevated, with uncertainty around supply pushing WTI above Brent, as traders worry that Iran's retaliation could affect Gulf suppliers.
• Economists and markets are still pricing in a relatively soon end to the war, with forward futures significantly lower.
• An escalation if the deadline is passed could change the outlook for both Brent and WTI.

Iran Escalation or Deal?

Markets are on tenterhooks as clocks tick down to 20:00 EST on Tuesday (01:00 BST Wednesday), a self-imposed deadline by US President Trump, who threatened to destroy energy and transportation infrastructure in Iran if they did not reopen the Strait of Hormuz. At the same time, reportedly, intermediaries are working on brokering an up to 45-day ceasefire, prompting speculation that his harsh rhetoric is part of a pressure campaign on Tehran. Brent has topped $110 per barrel, and WTI is even higher as traders worry what will happen if Iran does not accede to Trump's demands by the allotted time, but the prospect of a TACO trade limits the upside. Iran has threatened to retaliate by attacking regional nations, targeting their energy and utility infrastructure, which could significantly damage crude production capabilities.

On the positive side, there have been indications of easing conditions in the Strait. Reports suggest that more vessels are being allowed through during the extended weekend as Iran consolidates control over the vital seaway. Meanwhile, OPEC+ held its monthly meeting on Sunday, agreeing to increase production by a modest 206K bbl/day in May, when the Strait reopens. Markets are still pricing in a temporary supply disruption, with WTI futures for August delivery at just $80. However, spot premiums have jumped to all-time highs for US- and North Sea-sourced fuel, pushing WTI above Brent for the first time since the Russian invasion of Ukraine in 2022.

Crude Prices Set for More Volatility

The reversal of the Brent-WTI spread illustrates market uncertainty after both prices recorded their largest monthly increases ever in March. Brent gained over 60% since the start of the US-Israeli attack on Iran, with several days showing double-digit price variations in a single day. Economists have raised their 2026 forecast for crude to an average of almost $83, up from under $64 before the war began. WTI is forecast to see a more modest increase, with an average under $77. However, the trajectory is likely to be erratic and could depend on what happens over the next 24 hours. If a deal is reached to reopen the Strait of Hormuz, the price of crude could drop substantially and eventually fall below pre-war levels, given built-up inventories.

Another punt on Trump's deadline (this is the third time he's issued it) could leave markets in limbo as they react to news of continued attacks or vessels transiting the Strait. However, if Trump were to carry through with his threat, crude prices could initially spike, though whether they remain high will likely depend on Tehran's response. The concern is that Iran will launch counterattacks against Gulf oil infrastructure, but the US claims it has substantially degraded Iran's offensive capabilities.

WTI Consolidates within Pennant-Like Pattern

West Texan oil has found resistance at the upper trendline of a potential pennant or triangle pattern near $108/bbl, which coincides with the upper VWAP line. The short-term consolidation between the peak and $102 suggests a continuation, especially as the price remains in triple-digit territory, unless the lower end of the range gives way to bears. A continuation higher would open the door to the $115 peak of early March, while a breakdown under the middle VWAP line at $97 would expose the lower end of the indicator at $87. This would still point to a continuation, as it would increase the odds of forming a triangle pattern.

Source: SpreadEx | Light Crude, Daily Chart