Middle East geopolitical risks have risen again, directly impacting the global energy market. Affected by the drone attack on the Barakah Nuclear Power Plant in the UAE and the substantive stagnation of US-Iran ceasefire negotiations, international crude oil prices continued to rise on Monday. Brent crude prices touched near $111 per barrel during the session. As of noon Beijing Time on May 18, Brent and WTI crude oil futures recorded gains of approximately 1.7% and 1.8% respectively, marking three consecutive trading days of increases.
On May 17 local time, the Barakah Nuclear Power Plant, the only nuclear facility within the UAE, was breached from the outside. According to local official channels, three drones attempted to cross the western border into territorial airspace. Two were shot down by air defense systems, while the third hit peripheral power equipment at the station and caused a fire. Although UAE authorities emphasized that the accident caused no casualties and radiation safety levels remained normal, and the International Atomic Energy Agency confirmed stable unit operations, the incident has been characterized as a terrorist attack by the UAE Foreign Ministry, which stated it reserves the right to respond. Meanwhile, Saudi Arabia also intercepted drones coming from the direction of Iraq on the same day, showing a trend of spreading security threats in the Gulf region.
Against the backdrop of intensified military friction, the diplomatic path aimed at easing conflicts appears exceptionally difficult. Information disclosed by multiple parties indicates a huge divergence in core demands between the United States and Iran. Conditions proposed by the US include no payment of war reparations, requirements to transfer enriched uranium, limits on the number of nuclear facilities, and maintaining asset freezes. In contrast, the Iranian side insists on a complete cessation of conflict, lifting of sanctions, unfreezing of assets, and obtaining war reparations. The two sides' positions are almost entirely mutually exclusive, hindering efforts to resume navigation through the Strait of Hormuz. US President Trump recently increased pressure on Iran in public occasions, implying that if the other party cannot meet requirements, they may face more severe consequences, and plans to convene a national security team to discuss follow-up military options.
Contraction on the supply side has further pushed up market anxiety. After the sanction exemption order for Russian seaborne crude oil expired last weekend without renewal, this means that besides possible restrictions on Persian Gulf exports, legal circulation channels for Russian crude oil are also narrowing. Analytical institutions generally believe that a potential blockade of the Strait of Hormuz is the core driver of this round of oil price surges. Since the end of February this year, the cumulative increase in Brent crude has exceeded 50%. Multiple investment banks have raised their annual price expectations, with some views pointing out that under extreme supply interruption scenarios, oil prices could even challenge higher price levels. Market focus is currently on the US high-level meeting this Tuesday. If signals of escalated actions are released at that time, international oil prices may face a new round of volatility tests.
