WTI, the US crude oil benchmark, traded near $86.70 during Asian hours on Monday. Prices rose amid renewed tensions between the US and Iran in the Strait of Hormuz.
Iran’s military said the US violated a ceasefire by firing at an Iranian commercial ship, according to Bloomberg. Iran said it would respond to what it called maritime and armed robbery by the US military.
On Sunday, Iran said it would not take part in new peace talks with the US. This came hours after US President Donald Trump said Iranian negotiators would go to Pakistan on Monday for a second round of talks.
Market focus is also on the American Petroleum Institute (API) inventory report due on Tuesday. A larger-than-expected crude draw can suggest stronger demand and support prices, while a bigger build can point to weaker demand or excess supply and pressure prices.
WTI stands for West Texas Intermediate and is one of three major crude types, alongside Brent and Dubai. It is a light, sweet crude sourced in the US and distributed via the Cushing hub.
WTI prices are driven mainly by supply and demand, OPEC decisions, political unrest, and the US Dollar. API reports are released on Tuesdays and EIA data follows a day later, with results within 1% of each other 75% of the time.
With West Texas Intermediate crude holding firm around $86.70, we are watching renewed tensions in the Strait of Hormuz closely. Last week’s incident involving a US naval vessel and an Iranian commercial ship has put the market on edge. This situation introduces a geopolitical risk premium that could easily push prices toward $90 in the short term.
We remember the market volatility during similar standoffs with Iran back in 2025, which created sharp, unpredictable price swings. This is also reminiscent of the supply fears following the events of 2022, which taught us how quickly geopolitical conflict can add $10 or more to a barrel of oil. This history suggests that any escalation in the Strait of Hormuz will have an immediate and significant impact on prices.
Beyond the Middle East, we are seeing signs of solid demand which supports these higher prices. China’s latest Caixin Manufacturing PMI, released in early April 2026, came in at 51.2, signaling continued expansion in the world’s largest oil-importing nation. This underlying economic strength provides a stable floor for crude prices, even without the current geopolitical threats.
However, the strength of the US Dollar is a factor we must watch. After March 2026 inflation data came in hotter than expected, the Dollar Index (DXY) has climbed to a six-month high of 106.50. A stronger dollar traditionally acts as a headwind for oil, making it more expensive for foreign buyers and potentially capping a major price rally.
On the supply side, OPEC+ has maintained its production cuts, but we see US output continuing to climb, recently hitting a record 13.4 million barrels per day according to the latest EIA report. This robust non-OPEC supply is a key reason prices have not broken out above $90 despite the global tensions. This tug-of-war between OPEC discipline and US production will continue to define the upper limits of the market.
This week, we are focused on the American Petroleum Institute (API) report due on Tuesday. Market consensus expects a crude inventory draw of about 2.1 million barrels, which would be bullish. We will be paying close attention to gasoline inventories, as a surprise build could signal weakening consumer demand ahead of the summer driving season.
Given these conflicting signals, we expect implied volatility to rise in the coming weeks. For derivative traders, this makes strategies like buying straddles or strangles attractive to capitalize on a significant price move, regardless of direction. For those with a bullish bias, bull call spreads could offer a defined-risk way to profit from a potential grind higher toward the $90 level.
