1st May 2026
The recent return of oil prices to around $111 per barrel has raised a familiar question: is this simply the result of markets rolling into a new trading month, or is something more fundamental at work? The answer, despite the timing, is clear. This is not a calendar driven shift. It is a geopolitical one.
At any given moment, oil prices reflect a blend of physical supply, future expectations, and market positioning. While the transition from one futures contract to another say, from June to July or August can produce small price movements, these are typically marginal. What we are seeing now is something far more significant. The current price level is being driven primarily by heightened geopolitical tensions, particularly in the Middle East, and the risks those tensions pose to global supply.
Central to these concerns is the vulnerability of key shipping routes. The Strait of Hormuz, one of the most strategically important chokepoints in the global energy system, handles roughly a fifth of the world’s oil trade. Any threat to its operation whether real or perceived—has an outsized impact on prices. Markets do not wait for disruptions to occur; they price in the possibility. This is what traders refer to as a “risk premium,” and it is now firmly embedded in the current price of oil.
This helps explain the extreme volatility seen in recent days. Prices surged toward $125 before retreating back to the low $110s, not because supply conditions suddenly improved, but because sentiment shifted. Traders took profits, reassessed the likelihood of escalation, and responded to mixed signals from the geopolitical landscape. In such an environment, sharp swings are not anomalies—they are the norm.
The idea that a new month has pushed prices higher is not entirely without merit, but it is easily overstated. Oil is traded through futures contracts, each tied to a specific delivery month. As one contract nears expiry, trading activity shifts to the next “front-month” contract. This rollover can introduce minor price discrepancies, particularly if expectations about future supply and demand differ. However, these technical adjustments are small compared to the forces currently at play. The move to $111 is simply too large to be explained by contract mechanics alone.
To understand where prices might go next, it is useful to look at the structure of the futures market itself. Oil does not trade at a single price, but across a curve of future delivery dates. Sometimes this curve slopes upward a situation known as contango indicating expectations of higher prices in the future. At other times, it slopes downward, known as backwardation, suggesting that current supply is tight relative to future expectations.
At present, the market shows signs of tension in the near term, with front-month prices elevated due to immediate supply risks. Further out, contracts for later in the year, such as August, may reflect a more balanced view. Traders are effectively making a judgement call. Will current disruptions persist, or will they ease?
This brings us to the key question. Will oil prices rise again as the market moves into August contracts? The answer depends less on the calendar and more on the trajectory of global events.
If geopolitical tensions escalate or persist, the risk premium will remain—and could grow. In such a scenario, prices could move significantly higher, potentially revisiting or exceeding recent peaks. On the other hand, if the situation stabilises and supply routes remain open, prices could fall back as the risk premium unwinds. A third, and perhaps most likely outcome, is continued uncertainty: a volatile market where prices swing in response to headlines, with no clear directional trend.
What is clear is that oil is currently being priced on expectations rather than fundamentals alone. Supply has not collapsed, but the fear that it might has become the dominant force in the market. This distinction matters. It means that prices can move sharply in either direction, often with little warning.
For consumers and businesses, the implications are significant. Energy costs feed into everything from transport to food production, amplifying inflationary pressures across the economy. For investors, the environment is equally challenging. As one market observer put it, betting on oil at these levels can feel like “picking up nickels in front of a bulldozer”—the potential gains are there, but so are the risks.
In the end, the return to $111 is not about the turn of the month. It is about the fragility of a global system in which a single chokepoint, thousands of miles away, can influence prices at the pump. Until that fragility is resolved, volatility is likely to remain the defining feature of the oil market.