Oil market liquidity dries up as Brent open interest hits August low
Updated
Updated · Bloomberg · May 7
Oil market liquidity dries up as Brent open interest hits August low
13 articles · Updated · Bloomberg · May 7
The drop follows the US-Iran war and a record-long Strait of Hormuz blockade that has cut hundreds of millions of barrels of Persian Gulf crude from global markets.
With traders retreating from extreme Middle East volatility, thinner participation is amplifying price swings in Brent, a benchmark widely watched as a signal for the global economy.
The supply disruption has helped trigger an energy crisis, as the prolonged closure of the key shipping chokepoint tightens oil availability well beyond the Gulf.
As markets bet on a short-term oil crisis, what happens if the Strait of Hormuz blockade becomes the new normal?
Beyond the gas pump, how is the conflict in the Strait of Hormuz now threatening the world's food supply?
Can the U.S. win an economic war with Iran if it means pushing global oil prices past the breaking point?
Strait of Hormuz Blockade Drives Brent Futures Open Interest Collapse and Market Dysfunction in May 2026
Overview
In early 2026, Iran's blockade of the Strait of Hormuz halted a significant portion of global oil transit, triggering a sharp surge in physical Brent crude prices and extreme market volatility. This crisis caused a severe liquidity crunch in the Brent futures market, as rising margin requirements and heightened risk forced many traders to exit, pushing activity toward physical and OTC markets. Meanwhile, geopolitical tensions led to a brief US naval escort operation that was quickly paused due to diplomatic intervention, leaving a deadlock with Iran demanding a peace deal for reopening. Gulf producers, including the UAE, responded by investing in pipeline infrastructure to bypass the strait, while the UAE's exit from OPEC further tightened the market, amplifying volatility and risk premiums embedded in current oil prices.