A stark warning from President Trump to Iran has pushed crude oil prices higher, adding to a 10% gain from the prior week as markets brace for potential military action ahead of a key White House meeting.
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WTI crude extends 10% gain as Trump warns Iran on stalled talks
(P1) Crude oil prices surged on May 18 after U.S. President Donald Trump issued a warning that time is running out for diplomatic progress with Iran, intensifying fears of a broader conflict that could threaten global energy supplies. The rally, which extended a 10 percent gain from the previous week, comes as military planners prepare to present strike options and a critical 60-day congressional deadline for authorizing military force approaches.
(P2) "There won't be anything left if there is no progress soon in the stalled U.S.-Iran talks," Trump warned, according to a report. This rhetoric has significantly dampened expectations for a near-term diplomatic resolution, with prediction markets pricing the probability of a US-Iran diplomatic meeting by June 30 at just 49%, according to data from one platform.
(P3) The market reaction was immediate and sharp. West Texas Intermediate (WTI) crude for May 2026 delivery saw its probability of hitting $110 per barrel jump to 59.5%, reflecting heightened geopolitical risk. In contrast, the likelihood of a permanent peace deal between Israel and Iran by June 30, 2026, fell to a low of 12.5%, down from 16% a day earlier, as the focus shifts from diplomacy to potential military escalation.
(P4) At stake is the security of the Strait of Hormuz, a chokepoint through which roughly 20% of the world's oil passes. Trump is scheduled to convene a Situation Room meeting on Tuesday to discuss military options, including potentially targeting Iran's Kharg Island oil terminal. The urgency is compounded by a U.S. law requiring congressional approval to continue hostilities beyond 60 days from February 28, 2026, creating a narrow window for authorized action.
The Hormuz Crisis
Tensions have been escalating for weeks, with G7 finance ministers meeting in Paris to discuss potential new sanctions on Iran. Tehran has responded by announcing its intention to monetize transit through the Strait of Hormuz, a move seen as a de facto blockade by Washington. This follows a series of maritime disruptions and a stalled ceasefire in the ongoing 2026 Iran war, which has involved the U.S. and Israel against Iran and its allies since February.
What to Watch
Investors and geopolitical observers are closely watching for the outcome of Tuesday's Situation Room meeting, which could authorize military strikes in the near term. Any announcements from the G7 regarding sanctions or from Iran regarding the implementation of transit fees in the Strait of Hormuz will be critical market drivers. The January 2020 strike on Qasem Soleimani, which prompted a jump in Bitcoin as investors sought assets uncorrelated to geopolitical risk, serves as a recent precedent for how markets might react to a sudden military escalation.
This article is for informational purposes only and does not constitute investment advice.
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