# Brent Breaks $111 as Hormuz Crisis Triggers $25B Global Hit

18 May 2026 · OILAV

**Escalating Strait of Hormuz crisis drives Brent above $111 while global businesses already face $25 billion in losses from supply disruptions.**

## Key levels

- Brent: support 108.5, resistance 115
- WTI: support 100, resistance 107.5

## Price Action & Technicals

> Brent's break above $111 signals the start of a new leg higher, targeting $115-118 range.

**Brent crude smashed through $111** in overnight trading, marking a decisive break above the $110 psychological level that has capped rallies since February. The **4.96% five-day surge** pushed Brent to $110.87 settlement, with spot prices hitting **$111.37** - the highest since the Iran crisis began. WTI's more modest **1.73% weekly gain to $102.77** reflects structural weakness in US crude amid bloated Cushing inventories, widening the Brent-WTI spread to **$8.60**.

**Oil volatility (OVX) remains elevated at $72.35**, signaling persistent fear premiums despite relatively muted price action. The VIX-oil relationship suggests traders are pricing in tail risks beyond current fundamentals. Technical momentum is clearly bullish - Brent's break above $110.50 resistance opens a path to **$115**, with next major resistance at **$118** from October 2022 highs.

## Supply & Inventories

> Supply destruction accelerating with Iraq exports down 89% while global stocks head toward record lows.

**Iraq's Hormuz exports collapsed 89%** to just 10 million barrels in April versus 93 million barrels monthly pre-crisis, representing a **2.7 million b/d supply shock** from this source alone. The trickle of tankers breaking through the blockade - including a Greek Suezmax reaching India Friday - demonstrates the strait isn't completely sealed but remains severely constrained. **US crude production holds steady at 13.71 million b/d**, providing some offset to Middle Eastern losses.

**EIA crude stocks at 452.9 million barrels** remain above five-year averages, but UBS warns **global inventories could hit record lows by month-end** if Hormuz remains closed. The disconnect between still-adequate US storage and tightening global balances explains WTI's underperformance versus Brent. Product crack spreads show stress - gasoline down **1.34%** despite driving season approach suggests refinery runs are being curtailed by crude supply fears.

## Geopolitics & Disruptions

> Diplomatic failure and escalating rhetoric point toward prolonged conflict with civilian targets now threatened.

**Trump's weekend ultimatum to Iran** - "get moving or there won't be anything left" - signals escalation risk after his Beijing summit with Xi failed to produce breakthrough. The president's threat to strike **civilian infrastructure** raises stakes beyond military targets, suggesting broader conflict scope. **Drone attacks on UAE and Saudi Arabia** over the weekend shattered hopes of regional de-escalation, with markets now pricing permanent supply disruption scenarios.

**China's silence on mediating** the crisis despite importing 11 million b/d from the region reflects Beijing's calculation that higher oil prices hurt the US more than China. Trump's admission he **didn't ask Xi to pressure Iran** suggests diplomatic options are narrowing. The **$25 billion business impact** cited by Reuters represents just the beginning - Goldman estimates global GDP could contract **0.5%** if disruptions persist beyond Q2.

## Positioning & Flows

> Spec positioning has room to run higher as systematic funds play catch-up to crisis fundamentals.

**CFTC net spec positioning jumped to 129,583 contracts** as of May 12, up from recent lows but still **40% below peak** crisis levels, suggesting significant upside room for momentum buying. Open interest climbed **23,000 contracts** indicating fresh money entering long positions rather than short covering. The **$38 billion Q1 upstream M&A surge** reflects capital allocation toward domestic production as Middle Eastern supplies remain uncertain.

**UAE's OPEC exit** effective May 1 removes **3.2 million b/d** of production from quota constraints, but Emirati spare capacity remains limited. Money manager longs at **214,128 contracts versus 84,545 shorts** show bullish conviction, but positioning isn't stretched enough to signal capitulation buying yet. The gap between financial and physical positioning suggests systematic funds are lagging the crisis.

## Macro & Cross-Asset

> Energy-driven inflation forces central bank hawkishness while reshaping global investment flows away from Middle East exposure.

**DXY at 118.04** creates headwinds for dollar-denominated commodities, but oil's crisis premium overwhelms currency effects. The **447bp 10-year Treasury yield** signals Fed hawkishness amid energy-driven inflation concerns - core PCE could breach **4%** if oil sustains above $110. Natural gas surged **5.80%** as power generators prepare for summer demand amid potential fuel oil switching.

**G7 finance ministers meet Monday-Tuesday** in Paris as borrowing costs surge globally. Europe faces particular vulnerability with energy costs creating **clear winners and losers** for AI investment, according to CNBC. The energy crisis is reshaping capital flows - **Argentina's Vaca Muerta seeing Big Oil rush** as companies diversify away from Middle Eastern exposure. China's **record clean energy spending** takes on new strategic importance as oil security dominates policy.

## What to watch

- G7 finance ministers meeting Monday-Tuesday in Paris
- Trump-Xi diplomatic developments following Beijing summit failure
- Iraqi crude export data for early May (due this week)
- EIA petroleum status Wednesday 10:30 ET for inventory drawdowns
- Hormuz tanker tracking for breakthrough attempts

## Risks to the view

- Trump strikes Iranian civilian infrastructure (possible)
- China mediates Hormuz reopening (tail risk)
- OPEC+ emergency production increase (likely)

## Outlook

Brent targets $115-118 range as Hormuz crisis deepens with diplomatic failure and escalating rhetoric. The $25 billion business impact is just the beginning of a supply shock that could push global inventories to record lows by month-end.