11th May 2026
At 900am today the oil price has risen again to almost $105.
The oil market is in a “yo-yo” phase right now because traders are reacting hour by hour to conflicting news about war risks, supply shortages, peace negotiations and the wider economy.
Today’s rise is mainly being driven by renewed fears that the conflict involving Iran and the Strait of Hormuz could drag on longer after the latest diplomatic setback between the US and Iran. Markets reacted strongly after reports that President Trump rejected Iran’s latest response to a peace proposal, increasing fears the Strait could remain heavily disrupted.
The key thing to understand is that oil traders are swinging between two completely different scenarios:
Fear of severe shortages → prices surge.
Hope of peace or restored shipping → prices suddenly crash back down.
That is why you are seeing huge daily swings instead of a steady trend.
At the centre of it all is the Strait of Hormuz, through which roughly a fifth of the world’s seaborne oil normally passes. Any hint that shipping could worsen sends prices sharply higher. Any rumour of talks or partial reopening sends them sharply lower.
Over the last week alone, Brent crude has swung violently:
rising above $110 on supply fears,
falling sharply on hopes of a US-Iran agreement,
then rebounding again as negotiations appeared to stall.
There are several reasons behind the volatility:
Geopolitical headlines dominate trading
Oil traders are reacting instantly to every military strike, tanker incident, diplomatic statement or ceasefire rumour. Markets currently move more on politics than normal supply-and-demand data.
Physical supply fears remain real
Even when prices fall temporarily, underlying concerns remain because inventories are tightening and some tankers are still avoiding the Gulf region.
Speculators amplify moves
Large hedge funds and trading firms are piling into and out of oil futures rapidly. That exaggerates every move upward and downward.
OPEC and producers are not calming markets
Normally Saudi Arabia or OPEC might rapidly increase production to stabilise prices, but production increases have been limited and many companies are reluctant to spend heavily expanding output because they fear prices could later collapse again.
Markets are also worried about recession
Whenever oil rises too high, investors start fearing economic slowdown, weaker consumer spending and lower fuel demand. That expectation then pushes prices back down again. So the market is effectively fighting itself between:
“there will be shortages”
and
“high prices will damage the economy and reduce demand”.
This creates the unstable back-and-forth pattern.
The broader outlook is that volatility may remain extreme for weeks or even months. The U.S. Energy Information Administration still expects elevated prices through much of 2026 because supply disruption risks remain significant.
For the UK, this matters because even though Britain imports less directly from the Gulf than many Asian countries, global oil prices set the price for:
petrol and diesel,
airline fuel,
heating costs,
food transport,
manufacturing,
and ultimately inflation and interest rates.
So every sharp move in oil quickly feeds into wider economic worries.