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Week of May 11-17, 2026

While the film industry held its annual party in Cannes, global energy premiered its own version of Everything Everywhere All at Once.

Diplomacy between the US and Iran stalled again this week, with President Trump rejecting Tehran’s counter-proposal, the Trump-Xi summit producing no mechanism to reopen Hormuz, and Bloomberg Economics warning a return to open conflict is likely. The IEA reported oil inventories declining at approximately 4 million barrels per day, with total supply losses since February reaching 12.8 million bpd, and said the market will remain severely undersupplied until October even if the conflict ends next month. Aramco’s CEO warned of critically low fuel stocks before summer, with 100 million barrels lost every week; JPMorgan said commercial inventories could approach operational stress levels by early June.

The crisis infrastructure response is hardening into permanent commitments. The UAE is doubling its Hormuz bypass pipeline to 3 million bpd by 2027. Canada unlocked a 1 million bpd Pacific pipeline under loosened climate rules. ExxonMobil and Shell returned to Alaska, bidding a record $163 million for exploration leases. Yet none of the five Western majors raised spending plans; capital discipline held as all five beat Q1 earnings.

The energy system experienced stress in every dimension and divergent reactions with often contradictory narratives emerged. Coal shipments surged to the third-highest May on record; India announced over 300 million tonnes of new blast furnace capacity. Simultaneously, Chinese EV exports rose 112%, solar shipments doubled to a record, and Fervo Energy debuted at $9.8 billion on geothermal’s pitch to AI data centres. In Europe, 40 TWh of solar will go unused as output exceeds demand and grid capacity. PJM wholesale power prices rose 76% on data centre load. TotalEnergies’ 50% profit jump triggered windfall tax proposals and nationalisation appetites in France, while Europe’s oil majors earned an estimated $3.3 to $4.75 billion in extra trading profits. The Hormuz closure continued to light up the invisible supply chains via second-round effects, reaching construction (PVC +70% in Japan), EV batteries (seaborne sulphur collapsed 97%), and food logistics (Gulf freight at records above Covid peaks). The question the market is avoiding: what happens if the US and Chinese supply buffers exhaust before Hormuz reopens. Morgan Stanley’s answer is Brent at $130 to $150.

Part 1: The Gulf Crisis

Stuck in a ceasefire on life support

The week opened with President Trump rejecting Iran’s counter-proposal as “totally unacceptable” and describing the ceasefire as on “massive life support.” Iran demanded a lifting of Washington’s naval blockade, sanctions relief, and maintained control over Hormuz traffic. Pres. Trump considered reviving “Project Freedom,” the short-lived escort plan, while Iran deployed Ghadir-class submarines in the strait. The Trump-Xi summit in Beijing on Thursday didn’t move the diplomatic dial; and according to a US official, Pres. Xi expressed interest in buying more US oil to reduce China’s dependence on the waterway. This was consistent with the active promotion of US energy as a security bulwark. On Saturday, Pakistan’s interior minister arrived in Tehran to try to restart mediation, and Bloomberg Economics warned a return to open conflict was “likely.” In the background, the military picture sharpened with regional fire exchange. Saudi Arabia launched retaliation strikes against Iran after its energy facilities were hit, while noting it was not joining the broader US-Israeli campaign. The UAE struck back too, coordinating with Israel. Qatar declined to retaliate after Ras Laffan was hit. US intelligence assessments revealed Iran retains access to 30 of 33 missile sites along Hormuz and approximately 70% of its prewar stockpile.

The physical implications

The IEA reported global oil inventories declining at approximately 4 million barrels per day in March and April, with total supply losses since February reaching 12.8 million bpd, and said the market will remain “severely undersupplied” until October even if the conflict ends next month. OPEC output fell to 20.04 million bpd in April, the lowest since at least 2000. Aramco CEO Amin Nasser warned that gasoline and jet fuel stocks are heading for “critically low levels” before summer, with the world losing a cumulative 1 billion barrels since the war began and 100 million more every week. If disruption continues to mid-June, the recovery could drag into 2027. Even a ceasefire will not restore normal flows quickly: the UAE’s Habshan gas plant will not return to full capacity until 2027; Qatar’s damaged LNG trains at Ras Laffan accounted for 17% of production, and the cryogenic heat exchangers can take four to five years to replace. Eurasia Group assessed “reduced production until the end of the decade.” Approximately 1,600 vessels remain trapped near the strait. Iran’s own Kharg Island showed no tankers on three consecutive days, the first prolonged halt since the war.

The biggest oil supply disruption in history has not produced record prices. Brent traded between $101 and $107, well below the $126 peak in late April. Two buffers explain the calm: the US increased net seaborne exports by 3.8 million bpd, and China cut net imports from approximately 14 million to 8.5 million bpd by running down an estimated 1.0 to 1.5 billion barrels of crude in storage. The question is how long both hold. US diesel inventories are at their lowest seasonal level since 2005. The oil market is, as Ron Bousso wrote in Reuters, “not just tight, but brittle.”

Beyond crude

China’s fuel exports failed to recover despite signalling a relaxation of its ban: just 417,000 bpd versus 750,000 bpd pre-war. US ethane exports hit a record 776,000 bpd in March, with three-quarters going to China. Hedge funds almost tripled their net bets on soyabean oil as biofuel feedstocks became a proxy for the oil shock. Senator Hawley introduced legislation to suspend the federal gasoline tax after President Trump backed the move, with average US petrol prices up more than 50% to $4.52 per gallon. Gulf freight rates hit record highs, surpassing Covid-era peaks, as trade flows into the Gulf fell 60 to 80%.

Monday, May 11

• US considers suspending fuel tax as Iran war pushes up prices (Financial Times)

• Saudi Aramco warns fuel stocks heading for ‘critically low levels’ (Financial Times)

• US, Iran Far Apart in Talks to End War and Reopen Hormuz (Bloomberg)

• OPEC oil output hits new low in April on Hormuz export disruption, Reuters survey finds (Reuters)

• Strait of Hormuz disruption could push oil market recovery into 2027, Aramco CEO says (Reuters)

• Oil Jumps After Trump Says Iran’s Peace Offer ‘Unacceptable’ (Bloomberg)

• Why are oil prices not higher? (Financial Times)

Tuesday, May 12

• UAE gas plant hit by Iranian attacks will not be fully repaired until 2027 (Financial Times)

• Hedge funds bet on biofuels to profit from Iran oil price shock (Financial Times)

• India’s workers quit city life over impact of Iran war on gas prices (Financial Times)

• Iran’s Kharg Island Oil Shipments Show First Prolonged Halt Since Start of War (Bloomberg)

Wednesday, May 13

• Oil Inventories Falling at Record Pace on Iran War, IEA Says (Bloomberg)

• Saudi Arabia launched strikes against Iran (Financial Times)

• Oil Holds Gain With Iran’s Exports Strained as Conflict Drags On (Bloomberg)

• Trump Repeats War Threats Against Iran Ahead of Meeting With Xi (Bloomberg)

• Breakingviews - Gas prices’ breathing room is really an air pocket (Reuters)

• IEA warns of further ‘price spikes’ as oil inventories plunge at record pace (Financial Times)

Thursday, May 14

• China’s fuel exports fail to rebound after Beijing signals easing of ban (Financial Times)

• China turns to US for help as Iran war upends plastics industry (Financial Times)

• Ship Taken in Gulf of Oman and Heading to Iran, UK Navy Says (Bloomberg)

• In Qatar, Energy Sector Damage Is Severe, and the Way Back Will Be Long (New York Times)

Friday, May 15

• Why the oil futures curve is not a crystal ball (Financial Times)

Saturday, May 16

• US, Iran Stall on Hormuz Reopening as Oil Supplies Tighten (Bloomberg)

• US Allows Russia Oil Sales Waiver to Expire Despite Tight Market (Bloomberg)

Sunday, May 17

• Gulf freight rates jump as shipping companies turn to trucks to move cargo (Financial Times)

Part 1: The Gulf Crisis

The Invisible Supply Chains

The Hormuz closure’s exposure of the invisible supply chains accelerates in the second and third order effects of the disruption on the availability and cost of materials. Construction projects worldwide are stalling as PVC prices jumped 70% in Japan, UK contractors warned of 10 to 30% price increases, and Australian builders estimated up to A$50,000 added per new home. A quarter of one Japanese builder’s projects are delayed because suppliers cannot confirm delivery dates for piping, insulation, and prefabricated bathrooms.

Less visibly, the EV battery supply chain is exposed. Approximately half of global seaborne sulphur went through Hormuz before the war; April volumes collapsed to 30,000 tonnes from a pre-war monthly average of 1.27 million. Sulphur is the critical input for extracting battery-grade nickel in Indonesia and lithium in Australia. Prices are up 50% to $880 per tonne. Approximately 8% of global aluminium supply also went through Hormuz and has largely stopped. The common pattern: the deeper the supply chain, the longer it takes the disruption to surface, and the harder it is to substitute. These effects will outlast the crisis itself.

• Hormuz closure extends well beyond oil to threaten Chinese EVs (Reuters)

• Hormuz closure stalls construction projects as material costs soar (Financial Times)

The Transition: What Gives?

This is the theme where the fracture is most visible.

Coal shipments rose, with global imports in May expected to reach 107 million tonnes, the third-highest for the month on record. South Korea lifted its 80% seasonal cap on coal-fired generation and added more than 4 GW in the first six weeks of the war. India has more than 300 million tonnes per year of new blast furnace steelmaking capacity announced or under construction, targeting over 400 million tonnes of annual production by 2035. Electric arc furnace capacity inched up just 1 percentage point to 34% of global production.

At the same time, Chinese clean tech exports are surging into markets opened by the energy shock. EV exports rose 112% year-on-year in April. Solar panel shipments doubled month-on-month to a record in March, reaching 50 countries; Nigeria alone saw a 519% increase. Orange SA plans to double its 15,000 solar-powered base stations across Africa. Fervo Energy, a next-generation geothermal company backed by Bill Gates and Google, debuted on the Nasdaq at $9.8 billion.

In Europe, solar capacity has reached approximately 490 GW, the continent’s largest installed power source, with around 80 GW to be added this year, roughly six panels every second. But approximately 40 TWh is expected to go to waste in 2026 as output exceeds what demand and grids can absorb. Europe’s already stretched consumers face paying twice: once for the subsidies that built the capacity, and again when producers are compensated to switch off.

In Canada, PM Carney’s “Powering Canada Strong” strategy loosened clean electricity regulations to expand gas’s role in the grid, while being noncommittal on 2030 Paris targets. The transition is not stalling. It is accelerating in some places, reversing in others, and hitting physical limits in others still, all at the same time.

• India drives global rise in coal-based steel capacity (Financial Times)

• Coal shipments jump as countries seek alternatives to disrupted gas supplies (Financial Times)

• China Green Tech Firms Target New Consumers Hit by Iran War Energy Shock (Bloomberg)

• Orange to Double Africa Solar-Powered Towers as War Boosts Costs (Bloomberg)

• Shares surge in debut of power producer favoured by Trump energy agenda (Financial Times)

• Solar Power Is So Big in Europe That Electricity Is Being Wasted (Bloomberg)

• PM Carney unveils plan to lower electricity costs (bnnbloomberg.ca)

An Upstream Party?

The crisis has revived exploration appetite in some places while reinforcing discipline everywhere else. ExxonMobil, Shell, and Repsol bid a record $163 million for leases in Alaska’s National Petroleum Reserve, with Shell returning after a decade-long hiatus. An independent wildcatter reported a 94% success rate across 35 wells, calling Alaska “the hottest play in the world.” Shell’s CEO Wael Sawan framed the return as replenishing the “funnel of opportunities.” Athan Manuel of the Sierra Club called it “a fool’s errand.”

Yet none of the five Western majors raised spending plans for 2026 or beyond, despite all five beating Q1 expectations. Volatility, not scarcity, will define the next phase. Venezuela circulated draft regulations under its new hydrocarbons law, opening refining, upgrading, and trading to private companies.

• Volatility, not high prices, will define Big Oil’s next chapter (Reuters)

• Oil majors return to Alaska as US state becomes ‘world’s hottest play’ (Financial Times)

• Venezuela Circulates Draft of Oil Law Regulations for Companies (Bloomberg)

Public Opinion, Reputation, and the Windfall Tax Flex

The reputation landscape this week pulled in every direction.

On the positive side, a new working paper from the Berkeley Lab estimated shale gas has saved US consumers $4.5 to $5.3 trillion since 2007. In Canada, 61% of British Columbia residents now support Enbridge’s pipeline expansion, reversing a decade of opposition, and three in five Canadians prioritise economic growth over environmental protection.

On the negative side, the optics of Europe’s three largest oil companies earning an estimated $3.3 to $4.75 billion in extra trading profits in Q1 are being used to incriminate without much debate.

TotalEnergies’ Q1 net profit jumping 50% to €5.8 billion triggered the social injustice narrative in France, and political enthusiasm to respond ranged from redistributive taxation to nationalisation proposals. The Socialists proposed a windfall profits tax they said could raise €2 billion. La France Insoumise suggested nationalisation. Green party leader Marine Tondelier proposed stripping CEO Pouyanné of the Légion d’Honneur, saying: “Of his own accord he should be saying ‘listen, I made this money, it wasn’t merited, we’re going to give it back to the French people.’” Several EU finance ministers pressed the European Commission to examine bloc-wide windfall levies.

In the Netherlands, a legal challenge was launched against the Port of Rotterdam Authority demanding it scale back fossil fuel operations by 2050, extending climate litigation from companies to public infrastructure. LNG Canada’s CEO acknowledged the Kitimat facility is flaring above permitted levels during startup.

The FT issued a long piece on the recent fossil-phaseout Santa Marta conference in Colombia, where nearly 60 countries attended; the US, Russia, and China were not invited.

• Europe’s oil majors reap up to $4.75bn from trading on Iran war volatility (Financial Times)

• How Much Has Shale Gas Saved U.S. Consumers? (energyathaas.wordpress.com)

• Legal challenge launched against Rotterdam port authority over fossil fuel operations (nltimes.nl)

• Sixty-one per cent of B.C. residents support Enbridge’s Westcoast natural gas expansion (nationalpost.com)

• ‘Le Total bashing’ grips France over energy profits (Financial Times)

• LNG Canada CEO responds to Kitimat flaring concerns as critics warn of health impacts (CBC News)

• The messy, chaotic and possibly quixotic quest to phase out fossil fuels (Financial Times)

Africa Ready to Step Up

African producers are gearing up to accelerate resource sovereignty and capture fiscal leverage, in the momentum of this energy crisis. Senegal’s Petrosen is preparing to take sole control of the $7.5 billion Yakaar-Teranga gas development when Kosmos Energy’s contract expires in July, targeting a $1 billion annual reduction in energy subsidies. Ghana is invoking pre-emptive rights to acquire Lukoil’s 38% stake in the Deepwater Tano Cape Three Points oil block. In a helpful move, S&P raised Nigeria’s credit rating for the first time in 14 years, citing higher oil prices, improved refining capacity, and sustained reform.

• Senegal Targets $7.5 Billion Gas Project to End Energy Subsidies (Bloomberg)

• Ghana Eyes Buying Sanctions-Hit Lukoil’s Stake in Oil Block (Bloomberg)

• S&P Raises Nigeria’s Rating for First Time in 14 Years (Bloomberg)

The New Map, Energy Security, and Power Play

Just as nobody imagined the closure of Hormuz, before it happened for the first time, nobody could imagine that this conflict would precipitate the redrawing of the global energy map so quickly and rather permanently, but there it is. The UAE is accelerating construction of a second pipeline to Fujairah, doubling its Hormuz bypass capacity from 1.5 to 3 million bpd by 2027. In Canada, PM Carney and Alberta Premier Smith signed an energy deal opening the way for a 1 million bpd oil pipeline to the Pacific coast. Abu Dhabi’s Mubadala backed the $13 billion Commonwealth LNG plant in Louisiana, part of a broader surge of Middle Eastern capital into US energy infrastructure.

On the energy security front, the EU began to officially recognise its growing dependence on US LNG as a risk, as the bloc’s regulators via ACER warned that with 58% of EU LNG sourced from the US last year, flagging that Europe risks a new single-supplier dependency. Anne-Sophie Corbeau in National Interest argued that the LNG inherent “flexibility” is a myth that has been exposed, with 62% of global supply coming from three countries, when there are no bypass pipelines, and no strategic stock release mechanism. This points to reliability and concentration being different risks, and the flexibility of the product doesn’t replace the need for systemic security design.

Meanwhile, energy is being wielded as a strategic instrument. Cuba has run out of diesel and fuel oil entirely after President Trump’s energy blockade severed Venezuelan supplies; protests erupted in Havana, with neighbourhoods lacking power for up to 22 hours. India declined Russia’s offer to sell sanctioned LNG, leaving approximately 60,000 tonnes stranded on a tanker near Singapore, and the US did not extend relief for Russian oil sanctions as a measure of easing the market.

• EU’s rising reliance on US gas brings risks, regulators warn (Reuters)

• The LNG Security Myth: How the Strait of Hormuz Exposes LNG’s Vulnerabilities (nationalinterest.org)

• Cuba runs out of diesel and fuel oil (Financial Times)

• US Says China Wants More Of Its Oil to Cut Middle East Reliance (Bloomberg)

• Abu Dhabi backs $13bn US gas plant as Middle East supplies falter (Financial Times)

• UAE Will Double Oil Export Capacity Bypassing Hormuz by 2027 (Bloomberg)

• Enbridge Warms Up to New Canada Oil Pipeline After Carbon Compromise (Bloomberg)

• India Rejects Russian LNG Under Sanctions (OilPrice.com)

• Commonwealth LNG Approves $13 Billion Louisiana Export Project (OilPrice.com)

Policy and Regulation

The EPA proposed repealing Biden-era coal plant wastewater rules, with Administrator Zeldin explicitly citing AI and data centre electricity demand as the reason to keep coal plants online. In Canada, PM Carney’s strategy adjusts clean electricity regulations to allow greater use of natural gas. In both cases, the rationale is practical (affordability, reliability, grid adequacy).

• Carney’s new energy plan clears the way for natural gas (ipolitics.ca)

• E.P.A. Moves to Weaken Water Pollution Rule for Coal Plants (New York Times)

AI and Energy Demand

Wholesale power costs in PJM, the US’s largest grid covering 67 million people, rose 76% year-on-year to $136.53 per MWh in Q1, with data centre load adding $13 billion in customer costs, according to a new PJM report. The grid operator warned it could face a supply shortfall as early as next year. VoltaGrid, which offers gas-powered microgrids for data centres, attracted a $1 billion investment from Blackstone and Halliburton at a valuation exceeding $10 billion. BloombergNEF projects data centre power demand will triple to 106 GW by 2035.

• Blackstone and Halliburton Said to Invest $1 Billion in VoltaGrid (Bloomberg)

• Data centers drive 76% surge in PJM power prices (eenews.net)

Other Energy Context Stories

Minerals Rush

Since Pres. Trump’s return, Washington has announced $18.6 billion in funding for critical minerals, the majority directed at rare earths. Government-backed minimum price guarantees for 15 years are shielding Western producers from the pricing tactics that held back investment for a decade. The market is consolidating fast: a “land grab” with a handful of players racing to build mine-to-magnet businesses before the supply chain gets filled.

• Deal rush in rare earths as west seeks to loosen China’s grip (Financial Times)

Macros

Global large-cap companies have added $5.4 trillion in market value since the war began, but the gain is almost entirely AI. Semiconductor companies gained 26% ($3.7 trillion). The AI economy and the physical economy are diverging, and the indices that blend them are hiding the strain.

• How AI mania is disguising big companies’ hit from Iran war — in charts (Financial Times)

Refined

Japan’s Eneos agreed to buy Chevron’s Asia-Pacific refining and retail assets for $2.17 billion. Western majors are shedding downstream complexity while Asian refiners are acquiring it.

• Japan’s Eneos Buys Chevron’s Asian Oil Assets for $2.2 Billion (Bloomberg)

SOURCES

Financial Times, Bloomberg, Reuters, New York Times, OilPrice.com, BNN Bloomberg, CBC News, E&E News, National Interest, NL Times, National Post, iPolitics, EIA, Berkeley/Haas

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