WTI Surges to $105 as Trump Orders US Navy Blockade of Strait of Hormuz, Iran Talks Collapse in Islamabad

Oil markets surged to their highest levels since the March peak on Monday after President Donald Trump announced that the United States Navy would blockade all maritime traffic entering or leaving Iranian ports in the Strait of Hormuz, following the collapse of weekend peace negotiations in Islamabad, Pakistan.

West Texas Intermediate (WTI) crude jumped 9% to $105.30 per barrel as of midday trading, while international benchmark Brent crude climbed 8.5% to $103.30 per barrel. Western Canadian Select (WCS) held at $84.22 per barrel, reflecting the wide heavy oil differential that continues to weigh on Canadian producers even as light crude prices surge.

Islamabad Talks Break Down Over Nuclear Demands

U.S. and Iranian negotiators met in Islamabad over the weekend seeking a diplomatic exit from the six-week Hormuz crisis that has already disrupted roughly 25% of global seaborne oil trade and 20% of worldwide LNG supply. The talks collapsed Sunday after Iran refused to agree to terms on its nuclear enrichment program. Trump, citing Iran's unwillingness to give up its nuclear ambitions, declared the ceasefire expired and ordered U.S. Central Command to enforce an immediate naval blockade of Iranian port traffic, effective Monday at 10 a.m. Eastern Time.

Iranian officials warned that the military presence near the strait would itself constitute a ceasefire violation, raising the prospect of renewed missile or drone attacks on regional energy infrastructure. U.S. Central Command has not publicly clarified whether China, Russia, or India-flagged vessels, which received exemptions under previous transit arrangements, will retain those exemptions under the blockade order.

Supply Shock Compounds Existing Disruptions

The blockade threatens to remove an estimated 1.5 to 1.7 million barrels per day of Iranian crude from global markets. That figure compounds damage already inflicted on the region's energy infrastructure since fighting began in late February.

Saudi Aramco restored its East-West pipeline to full capacity of 7 million barrels per day earlier this month after Iranian attack damage was repaired, and the Manifa offshore field has resumed output. Still, analysts note that the kingdom's total production remains below pre-crisis levels by roughly 600,000 barrels per day due to lingering field damage at Khurais and other assets. A previous Oil Authority report detailed the pipeline restoration, which was seen as a stabilizing signal before this weekend's diplomatic collapse.

Regional disruptions now span Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain, with collective production shut-ins expected to rise from 7.5 million barrels per day in March to as high as 9.1 million barrels per day across April. The International Energy Agency estimates the Strait of Hormuz accounted for roughly 20 million barrels per day of crude and petroleum product flow in normal conditions.

WCS Differential Widens as Light-Heavy Spread Expands

The surge in WTI and Brent has not been matched by equal gains in WCS, which reflects the heavy oil grades produced at Canada's oil sands operations. At $84.22, WCS trades at a discount of more than $21 to WTI, a spread that has widened as global refinery demand shifts toward lighter crudes to replace Middle Eastern barrels.

For Canadian producers with integration into upgrading or refining, however, the broader price environment remains highly supportive. BP and ConocoPhillips, both active in Canadian oil sands and the broader North American upstream, stand among the international operators likely to benefit from the elevated price environment even as their global portfolios absorb Middle East supply disruptions.

Market Outlook: $115 Brent Forecast as Disruptions Mount

The U.S. Energy Information Administration, in its most recent Short-Term Energy Outlook, projected Brent crude prices could peak near $115 per barrel in the second quarter of 2026 before easing as regional production slowly recovers. That forecast was published before Monday's blockade announcement, which analysts say adds new upside risk to the price trajectory.

While oil markets initially rallied to $126 Brent in mid-March before the temporary ceasefire trimmed gains, subsequent price movements have been sensitive to each escalation and de-escalation cycle. With the Islamabad talks now failed and a blockade in place, the next move depends on whether Iran retaliates directly against regional energy infrastructure or absorbs the naval pressure diplomatically.

OPEC+ faces its May 3 output decision against a backdrop of dramatically changed supply conditions. As Oil Authority reported, the group had been planning a production increase when oil prices appeared to be settling near $97 on ceasefire optimism. Monday's price action, with WTI now above $105, reframes that calculation entirely.

Sources: OilPrice.com, CNBC, U.S. Energy Information Administration Short-Term Energy Outlook