Crude oil surges amid stalled US-Iran peace talks

Today’s headlines

What’s happening: Crude oil prices traded higher this morning amid persistent US-Iran tensions.

What happened: Global supply concerns remained elevated on news of stalled peace talks between the US and Iran and drone strikes in the UAE and Saudi Arabia.

Oil prices rose even against a strengthening US dollar this morning.

Why it matters: US President Donald Trump warned that Iran was running out of time to reach a peace deal. Iran’s media reported that both sides remained divided on most matters, with the US offering no concrete concessions during peace negotiations.

Over the weekend, drone attacks were reported by the ‌UAE ⁠and Saudi Arabia. The biggest escalation came with drones targeting an electricity generator outside the UAE’s Barakah Nuclear Power Plant. UAE officials said they were investigation the source of the attack.

Both WTI and Brent had added more than 7% last week amid fading hopes of a peace deal between the US and Iran. Last week’s summit between Trump and China’s President Xi Jinping ended without any indication that it would help in reopening the Strait of Hormuz and resolve the conflict.

Hotter-than-expected inflation data from the US triggered speculations of no interest rate cuts by the Federal Reserve this year, while some expect a rate hike by December.

Strength in the US dollar weighed on oil prices as a higher greenback makes commodities more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.1% to 99.35 this morning.

Spot price for WTI crude oil climbed 1.6% to $107.64 per barrel, while Brent crude rose 1.2% to trade at $113.39 per barrel this morning.

In other energy trading, gasoline added 0.6% to reach $3.7234, while natural gas jumped 2.5% to $3.035 and heating oil prices climbed 1.1% to $4.0961.

What to watch: Investors will continue monitoring developments around the US-Iran peace talks. US President is also expected to meet top national security advisers on Tuesday to discuss options for military action.

Data on the US EIA (Energy Information Administration) crude oil stocks will be released on Wednesday. US crude inventories contracted by 4.306 million barrels to 452.9 million barrels in the week ended May 8, while stockpiles at the Cushing, Oklahoma hub fell by 1.702 million barrels. Gasoline inventories fell 4.084 million barrels to 215.7 million, while distillate stockpiles grew 0.190 million barrels to 102.5 million during the week.

The markets today

China’s stocks in focus today following the release of some major economic reports

Context: Equity markets in China fell this morning as talks between President Xi Jinping and Donal Trump offered no concrete roadmap on pressing issues.

Details: Data released this morning showed China’s new home prices fell 3.5% year-over-year in April, compared to a 3.4% decline in the previous month. The latest reading signalled the 34th straight month of decline in home prices.

China’s industrial production grew 4.1% year-over-year in April, easing from a 5.7% surge in March and missing market estimates of 5.9%. The latest reading signalled the softest industrial growth since July 2023, a fallout from the US-Iran conflict.

China’s retail sales grew 0.2% year-over-year in April, slowing from the previous month’s 1.7% growth. This, too, came in short of market estimates of 2% and represented the weakest sales growth since the decline in December 2022.

China’s surveyed urban unemployment rate fell to 5.2% in April from 5.4% in the previous month. The figure came in below market estimates of 5.3% and was the lowest reading since January 2026. China’s fixed-asset investment declined by 1.6% year-over-year in the January–April period, following a 1.7% gain in the first quarter.

Market sentiment was hurt by President Donald Trump leaving China without any immediate signs of any issues being resolved, from trade relations and Taiwan to opening of the Strait of Hormuz. Fears of stalled talks in the Middle East also weighed on China’s equity markets this morning.

The CSI 300 Index fell around 0.1% to 4,854.07 this morning, while the Shanghai Composite Index declined by 0.2% to 4,126.35. Hong Kong’s Hang Seng tanked 1.35% to 25,612.63.

What to watch: Amid lack of any major economic data from China this week, investors will continue monitoring developments related to the US-Iran conflict.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.71%, 2.07%, 1.60% and 1.48%, respectively.

The news shaping the markets

Ukraine launched a large-scale drone attack on Russia’s Moscow region. The news sent the USD/RUB pair lower in forex trading this morning.

Israel’s economy shrank at an annualised rate of 3.3% in the first quarter, following a revised 2.9% expansion in the previous quarter, which lent support to the USD/ILS forex pair.

New Zealand’s BusinessNZ performance of services index rose to 48.9 in April from 46.2 in March. Services activity contracting for the third straight month sent the NZD/USD pair lower in forex trading this morning.

Peru’s economy expanded by 3.21% year-over-year in March, topping market estimates of 2.2%. However, the latest reading eased from February’s 3.68% growth, lending support to the USD/PEN forex pair.

Singapore’s non-oil domestic exports surged 24.5% year-over-year in April, up from a 15.3% gain in the previous month. However, the USD/SGD pair rose in forex trading this morning.

What else to watch today

Italy’s balance of trade (1200 UAE Time), Brazil’s IGP-10 inflation (1500 UAE Time) and IBC-BR economic activity (1600 UAE Time), US NY Fed services activity index (1630 UAE Time) and NAHB housing market index (1800 UAE Time) as well as Russia’s current account (1700 UAE Time).