The Strait of Hormuz Blockade: The Collapse of Negotiations

  El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA 

The brief euphoria that swept global markets following Iranian Foreign Minister Abbas Araghchi’s announcement that the Strait of Hormuz would remain open to all commercial vessels during the ceasefire with the United States was short-lived.

On Saturday morning, Iran announced — according to CNN — that it was reimposing restrictions on the Strait of Hormuz, alleging that the United States had “betrayed its trust,” a clear reference to the continuation of the blockade announced by Trump. The situation deteriorated further by Saturday evening, when a tanker and a container ship were struck by projectiles launched by units of the Iranian Revolutionary Guard. Trump convened a Situation Room meeting to address the worsening conditions.

Oil markets were left wondering whether the second round of U.S.–Iran talks would take place on Monday, but hopes of reaching an agreement to end the 45-day blockade of the Strait of Hormuz are fading in the face of the latest developments obstructing free navigation — the result of the dual blockade: Iran at the Strait of Hormuz and the United States in the Gulf of Oman.

Iran’s announcement of the reopening of the strait came after Trump managed to broker a fragile ceasefire between Israel and Lebanon, which had driven the ICE Brent price back below $90 per barrel. Any new negotiations, if they materialize, will be decisive for the oil market: a breakdown would intensify the IEA’s warnings of an imminent fuel shortage in Asia and Europe.

To date, approximately 470 MMBBL of crude oil and around 350,000 BCF of natural gas have been withheld from global supply — a volume that will take months to normalize.

Market Dynamics: Physical Prices vs. Futures

The oil market operates on two types of prices: futures and physical crude prices. Under normal circumstances, the two tend to move in tandem, responding to similar signals. The current situation, however, is exceptional. The shortage of physical barrels available for immediate delivery poses a direct threat to supply chains. To avoid operational disruptions, buyers have been willing to pay substantial premiums for near-term deliveries. In today’s spot market, that premium has reached as much as $30 per barrel. Refineries are paying whatever the market demands to avoid cutting their runs; that desperation is reflected in physical crude prices, not in futures.

Markets are reacting not only to current flows but also to the possibility of further disruptions. In short, oil is rising because markets are pricing in uncertainty: reduced tanker efficiency and a delayed recovery in production. As long as the supply chain remains unstable, buyers are prepared to pay higher prices to secure supply.

Geopolitical Fundamentals

A global realignment of power characterizes contemporary geopolitical dynamics. Energy has taken on an increasingly central role as a fundamental instrument of statecraft. After a period of high volatility, the current environment points to a renewed emphasis among nations on energy security — driving a strategic reallocation of investment, both geographically and through the urgent prioritization of renewable energy development, now regarded primarily as a mechanism for strengthening energy resilience rather than solely as a response to climate change.

Hydrocarbon producers outside the Middle East are watching the unfolding crisis among the major Gulf producers with a mixture of astonishment and paralysis, seemingly unable to act to mitigate the supply shock. Over the past six weeks, more than 60 drilling rigs have been deactivated worldwide; fewer than half belong to Gulf producers, whose shutdowns are at least understandable. This inactivity lengthens operational response times for new investment and deepens uncertainty around global energy supply.

According to OPEC secondary sources, Gulf producing countries were forced to cut their output by nearly 8.0 million barrels per day. The hardest hit were Iraq and Kuwait: Iraq due to the lack of alternative export routes, and Kuwait because damage to its refining infrastructure has significantly reduced its processing capacity.

The normalization of the global economy will depend on the outcome of peace talks between the two parties in conflict — a prospect that does not look promising at this stage. Economists suggest that the economic damage stemming from the war with Iran is likely to persist even after the strait returns to normal operations.

Crude oil prices fell during the week but remained well above pre-war levels and are expected to ease only gradually, which will keep upward pressure on gasoline and other refined product prices. Everything depends on how the dual blockade is resolved and on the outcome of a potential second round of negotiations. As with the supply chain disruptions caused by COVID-19, restoring order could take a very long time.

Multiple factors will keep crude prices elevated even after the blockade is lifted:

•       Countries that drew down their inventories during the conflict will seek to replenish them once navigation is restored, sustaining elevated oil demand.

•       The willingness of shipowners and captains to make the passage will need to be assessed, as will the availability of insurance coverage adapted to the new risk environment.

•       Oil facilities across virtually every country in the region sustained damage during the fighting; the full extent is still being assessed and will undoubtedly continue to affect the supply of not only crude oil but also natural gas and petrochemical products, including fertilizers.

The very fact that the strait was closed demonstrates that it could be closed again at any time. This risk will likely be permanently embedded in oil prices and will shape investment decisions and operational strategies for major producers.

Proposals to Reduce Dependence on the Strait of Hormuz

This painful episode has spurred creative proposals to loosen Tehran’s grip on Gulf oil and gas exports. One of the most discussed topics is the construction of new pipelines. The most strategically compelling option is a route that bypasses not only the Strait of Hormuz but also the Bab-el-Mandeb Strait and the Red Sea — a concept with sound economic logic. Another proposal involves a pipeline to carry crude to the Mediterranean via the Israeli port of Haifa, though that would introduce an entirely different set of challenges.

Russia, China, and the Energy Realignment

Russia, meanwhile, has held its production steady at around 9.1 MMBPD, earning higher revenues thanks to elevated international prices and the suspension of U.S. sanctions, at least through May 16. In Hungary, despite the new government’s anti-Russian orientation, Prime Minister-elect Peter Magyar confirmed that supplies via the Druzhba pipeline — the main conduit for Russian oil to Hungary, Slovakia, and the Czech Republic — could resume as early as next week.

The United States has accused China of supplying medium-range cruise missiles to Iran. China has rejected the allegations and adopted a guarded posture, while working to manage the challenges posed by the U.S. blockade in the Gulf of Oman and monitoring the potential economic fallout that the conflict could inflict on the American economy.

The Rift Between the U.S. and NATO

As the year progresses, the relationship between Trump and NATO is showing deep structural fractures. Tensions no longer center solely on defense spending; they extend to the refusal of European allies to participate in conflicts outside their own territory, in particular the recent U.S.–Israel war with Iran.

Trump has labeled NATO a “paper tiger” and stated openly that he is considering withdrawing the United States from the alliance, arguing that the bloc “wasn’t there” when Washington needed it during the Middle East conflict. After allies initially declined to join the offensive against Iran, Trump recently rejected a NATO offer to help secure the Strait of Hormuz, telling the alliance to “stay out of it.”

In response, leaders such as UK Prime Minister Keir Starmer and NATO Secretary General Mark Rutte have defended the alliance’s effectiveness. At the same time, France has reiterated that NATO is a Euro-Atlantic security alliance, not a vehicle for operations outside international law in the Persian Gulf. Paradoxically, Europe is among the regions most severely affected by the conflict.

Brazil: A More Competitive Presidential Race

On a separate note, Brazil’s presidential election — scheduled for October — is shaping up to be more competitive than anticipated. Opposition senator Flávio Bolsonaro, son of former president Jair Bolsonaro — currently serving a prison sentence — has drawn level with President Luiz Inácio Lula da Silva in recent polling. Flávio Bolsonaro’s rapid rise in the polls makes it increasingly difficult to predict the outcome in a country that plays a critical role in global crude supply.

PRICE DYNAMICS

Oil prices ended the week sharply lower, with ICE Brent crude trading near $90 per barrel, following a significant decline of nearly 10% on Friday. The sell-off was driven by optimism surrounding a potential resolution in the Middle East and the reopening of the Strait of Hormuz.

The same sentiment lifted major equity indices, which rallied after Iran’s Foreign Minister declared the Strait of Hormuz “fully open” during the Israel–Lebanon ceasefire period. Markets will now react to fresh developments and to the outcome of negotiations expected to take shape in the coming days.

The Dow Jones, Nasdaq, and S&P 500 rose 1.7%, 1.3%, and 1.1%, respectively, in the final 30 minutes of Friday’s trading session, with the Dow adding 850 points. The S&P 500 and Nasdaq set new all-time highs for the third consecutive day. This market euphoria will need to be reassessed in light of whatever agreements — or lack thereof — emerge going forward.

Closing Prices — Friday, April 17, 2026

Brent (ICE): $90.38/BBL  |  WTI: $84.98/BBL

Weekly change: Brent −5%; WTI −11% vs. prior week’s close.

VENEZUELA

Oil and Gas Assets Change Hands

So far in April — and particularly over the past few days — Venezuela has begun to show signs of a partial, haphazard economic opening, unfolding within a political environment that continues to resist it. The regime’s restoration of ties with international financial institutions, long dismissed as agents of “imperialism,” represents a significant new variable in the murky landscape that has been taking shape since January 3.

Within the framework of the so-called “recovery” phase — the second stage of the Trump-Rubio plan — a range of unorthodox processes has emerged, particularly in the hydrocarbons sector. Asset swaps and direct area assignments, with little to no public disclosure of their terms, are raising legitimate concerns.

There is also a proliferation of visits by executives and technical teams seeking meetings with the Interim Government, PDVSA, joint ventures, and contractors to review oil and gas fields and facilities in search of opportunities. However, clear terms of participation have yet to be established. The most notable developments in this space are as follows:

•       Chevron–PDVSA Asset Swap. U.S. major Chevron signed key agreements with PDVSA to expand its operations in the Orinoco Belt. As part of the asset swap, Chevron increased its stake to 49% in the PetroIndependencia joint venture and assumed rights in the Ayacucho 8 area, while relinquishing Blocks 2 and 3 in the Deltana Platform — which contain gas prospects — along with an oil block in Lake Maracaibo (PetroIndependiente LL-652). Block 2 contains the giant Loran Field, discovered by PDVSA in the 1980s; Block 3 holds an exploratory well that encountered non-commercial gas at the time.

The Lake Maracaibo field, operated by Chevron (LL-652) and part of this transaction, was awarded to the company in the third round of Venezuela’s Oil Opening in 1996, with a signing bonus of $250 million. Chevron built platforms and infrastructure capable of handling 90 Mbpd, but production never exceeded 16 Mbpd.

In summary, the swap allows Chevron to clean up its portfolio by exiting a field whose potential was overestimated. For PDVSA, it clears the way to award Block 2 to the British company Shell, which will operate the unified development of the cross-border reservoir from Trinidad, with combined reserves exceeding 10 TCF.

•       Direct Assignments to Shell. PDVSA and British major Shell signed a Framework Agreement and a Technical-Financial Alliance for the integrated development of the Punta de Mata Division in Monagas state. The agreement focuses on the Carito and Pirital production units to boost oil and natural gas output, and includes the management of gas currently being flared or vented. Shell is also moving toward the start of development of the Dragon Field, located north of Paria, to supply natural gas to Trinidad.

•       Restructuring of the PetroQuiriquire Operation. Repsol announced a preliminary agreement to assume operational control of the PetroQuiriquire joint venture, under Article 36 of the newly revised Organic Hydrocarbons Law (OHL). Repsol plans to increase production by 50% within 12 months, amounting to approximately 22 Mbpd.

Restoration of Relations with International Financial Institutions

The International Monetary Fund (IMF) and the World Bank (WB) formally announced on April 16 the resumption of their relations with Venezuela, ending a suspension that had been in place since March 2019. The move enables the IMF to begin collecting basic data and conducting a comprehensive assessment of the Venezuelan economy — something that had not occurred formally since 2004.

The decision was taken after consultation with IMF member countries representing a majority of the organization’s voting power. The restoration of ties constitutes official recognition by the international financial institutions of the interim government of Rodríguez. Venezuela could regain access to its Special Drawing Rights, estimated at approximately $5 billion, and apply for new financial assistance programs.

These announcements, together with the issuance of operating licenses to the Central Bank and other state-owned banks, have allowed the monetary authority to access overseas accounts and inject more foreign currency into the domestic market. More than $1 billion offered over the past month has generated positive expectations of stabilization among investors.

Despite the ongoing inflationary crisis — evidenced by price increases, particularly for necessities — the foreign exchange market in the most recent week (ending April 19, 2026) remained relatively stable at the official rate of 481 Bs./$. However, a significant gap of around 28% persists with the parallel market.

Nonetheless, concern is growing over the limited progress in the so-called “transition” phase, as the population perceives no change in purchasing power, minimal movement on the release of political prisoners, and a regime reshuffle that amounts to little more than recycling ministers and other officials — not an encouraging sign. New investors, genuine or opportunistic, appear to be multiplying in the media and at regime events, but translating that interest into real investment will take time. The “guardianship” arrangement appears to need a course correction.

MCM in Europe

While all of this was unfolding in Caracas, opposition leader María Corina Machado (MCM) was completing a successful tour of Europe. She met with business leaders and politicians, including the heads of government in the Netherlands, France, and Italy, before concluding her trip in Spain. Although details about the objectives and outcomes of the tour remain limited, one can infer that in each country she secured political backing for the battle ahead: achieving political transition through early elections — serving as indirect pressure on the U.S. government while avoiding unnecessary friction.

In Madrid, at the Puerta del Sol, MCM addressed a massive rally. The square overflowed into the surrounding streets, packed with Venezuelan migrants who undoubtedly relived the emotions that MCM must have felt as she traveled across Venezuela in 2024 — demonstrating, to insiders and outsiders alike, something difficult to put into words: the political legitimacy that comes from the hope for change that her message inspires.

Petroleum Operations

Venezuela’s average production in March, according to OPEC secondary sources, stood at 988 thousand barrels per day (988 Mbpd), a discrepancy of 100 Mbpd compared with official figures. In February, that gap was only 25 Mbpd. One possible explanation is that the OPEC figures include Venezuelan condensates blended with produced crude, and that the volume of diluent used in some Belt wells is being underreported. Even so, these factors alone do not fully account for the gap reported for March. A monthly production increase of over 80 Mbpd appears excessive and is expected to be revised downward in the coming months, as has happened on previous occasions.

No adverse effects on production from power outages or Orinoco Belt crude blending capacity constraints were reported. This week’s production stood at 897 Mbpd, distributed as follows:

West	252 Mbpd
East	109 Mbpd
Orinoco Belt	536 Mbpd
TOTAL:	897 Mbpd

 

Joint ventures operating under OFAC licenses and under the new arrangements established in the recently amended Organic Hydrocarbons Law, which allows the private minority partner to be contracted as “operator,” are producing the following volumes:

Chevron	245 Mbpd
Repsol	47 Mbpd
Maurel et Prom	27 Mbpd

 

Orinoco Belt joint ventures with Chinese and Russian partners produced the following:

PetroSinovensa	90 Mbpd
PetroMonagas	88 Mbpd

 

Domestic refineries processed 245 Mbpd of crude and intermediate products, yielding 76 Mbpd of gasoline and 78 Mbpd of diesel.

Ammonia/urea and methanol production at the José petrochemical complex is running near nominal capacity, with no gas supply constraints; SuperOctanos remains offline due to a shortage of butane. The Morón Complex has been unable to restart due to insufficient gas supply.

Mid-month exports are estimated at 740 Mbpd, with the largest share destined for the U.S. market; approximately 60 Mbpd of residual fuel is estimated to be exported during the month. April exports include the backlog of crude that accumulated in inventories during the naval blockade at the end of last year.

Average price of the Venezuelan crude basket: $85.3/BBL

^[1] International Analyst

^[2] Nonresident Fellow, Baker Institute

A CEASEFIRE WITHOUT LOSING FACE

 El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA 

On the eve of the deadline President Trump had set for the Iranian regime — threatening destruction unless it stopped blocking the Strait of Hormuz — and amid a disinformation campaign on both sides of the conflict, the Pakistani government's intervention secured a two-week (15-day) ceasefire that took effect on April 8, 2026.

 

The last-minute agreement aims, above all, to reduce the intensity of the threats of an Armageddon in the Middle East, reopen free transit through the Strait, and create space for definitive peace negotiations after more than a month of increasingly dangerous hostilities. The truce is initially set for 15 days, running through April 22. Pakistani Prime Minister Shehbaz Sharif brokered the agreement, and both parties have designated Islamabad, Pakistan, as the venue for negotiations toward a "lasting" peace agreement.

 

Fragility of the Agreement

As is to be expected in situations of this kind, the agreement is highly fragile, and several violations have already been reported. One of the least clear elements of the situation is that Israel apparently did not participate in the negotiations and was only informed at the last minute, having continued its campaign against Hezbollah in southern Lebanon. Iran protested loudly and, together with Pakistan, maintains that Lebanon was part of the deal. However, without Israel at the negotiating table — despite being the third party to the conflict — that claim has little basis. Tehran has warned that it will not negotiate unless the agreement includes Lebanon.

 

The hydrocarbon demand from the Persian Gulf by China, India, Pakistan, South Korea, and Japan, along with U.S. domestic political considerations related to gasoline prices and Iran's interest in preserving its military arsenal and infrastructure, are probably the most significant variables in avoiding a prolonged conflict.

 

The Market Question: Is There Really a Ceasefire?

The key question that oil markets are asking is whether there is, in fact, a ceasefire, given that the Strait of Hormuz has not been reopened to shipping. Attacks on energy infrastructure in the Middle East continue to affect Saudi Arabia, and the Lebanese conflict keeps escalating. Nevertheless, oil recorded its largest weekly decline since July 2025; the market appears to be pricing in the mutual need of both parties to reach an agreement that keeps the Strait operational.

 

On Thursday the 9th, maritime traffic through the Strait was well below 10% of normal volume despite the ceasefire announcement, as Tehran reaffirmed its control by warning ships to sail only through its territorial waters. It is worth noting that the traditional shipping lanes run mostly through Omani territorial waters and are protected by the United Nations under international maritime law agreements.

 

Meanwhile, Russia and Ukraine agreed on a 32-hour temporary truce for Orthodox Easter. The ceasefire took effect on Saturday, April 11, at 4:00 p.m. local time and was scheduled to end at midnight on Sunday, April 12.

 

Several countries — including China, India, the United States, and Japan — have drawn on their strategic reserves to mitigate the supply shock, a measure that is at best palliative.

 

Drilling activity resumed its decline in both the United States and Canada, limiting the potential for a reactive rebound in production.

 

GEOPOLITICS AND FUNDAMENTALS

The Islamabad Negotiations

Direct, face-to-face negotiations between the United States and Iran began on Saturday, April 11, 2026, in Islamabad, Pakistan. These historic talks, mediated by Pakistan, represent the highest-level meeting between the two nations since the Islamic Revolution of 1979.

 

The American delegation was led by Vice President J.D. Vance and included Special Envoy Steve Witkoff and President Trump’s advisor and son-in-law Jared Kushner. Mohammad Bagher Ghalibaf, Speaker of the Iranian Parliament, led the Iranian delegation, which comprised 71 members, including Foreign Minister Abbas Araghchi and negotiator Ali Bagheri Kani. On the Pakistani side, Prime Minister Shehbaz Sharif, Army Chief Asim Munir, and Foreign Minister Ishaq Dar served as mediators.

 

Ahead of the talks, President Trump had stated that Iran’s 10-point proposal for a more comprehensive peace agreement would serve as a "viable basis for negotiation." However, that proposal includes a series of demands that appear to conflict with the U.S. 15-point framework.

 

Key Sticking Points in the Negotiations

The two most contentious issues, even before negotiations began, are:

 

•       The unconditional opening of the Strait of Hormuz, as demanded by Trump, while Iran seeks to maintain continuous control over transit through the Strait and collect navigation tolls.

•       A ceasefire in Lebanon is an Iranian precondition for any lasting peace agreement following Israeli strikes on Hezbollah. The United States and Israel contend that the Lebanese front is separate from the ceasefire between Iran and the United States. Iran insists that lasting peace must involve both the United States and Israel, and adds to this the complete withdrawal of military forces from the region.

 

The Trump Administration also seeks to ensure that Iran does not develop nuclear weapons, while aiming to limit its ballistic missile program. For its part, Iran seeks international recognition of its right to enrich uranium for civilian purposes and the release of $120 billion in frozen assets, in addition to broad sanctions relief, before any final agreement is reached.

 

Outcome of the Initial Round

Although initially reported as indirect, officials confirmed that direct, trilateral, face-to-face talks were held at the Serena Hotel in Islamabad. After extended meetings, Vice President Vance reported that no agreement had been reached and emphasized that the United States had put its best offer on the table.

 

Pakistani Foreign Minister Ishaq Dar said his country would attempt to facilitate new dialogue between Iran and the United States in the coming days: “The parties must maintain their commitment to the ceasefire.”

 

Shipping Routes Through the Strait

Iran’s Islamic Revolutionary Guard Corps published revised navigation charts. They ordered ships to sail through Iranian waters around Larak Island to avoid the risk of naval mines on the usual routes through the Strait, according to the semi-official Iranian news agency Tasnim. The maps show that shipping is being diverted entirely away from Omani territorial waters and into Iranian waters, with Larak Island serving as a checkpoint — and possibly a toll station.

 

Hundreds of tankers and other vessels have been trapped in the Persian Gulf since the war with Iran began on February 28, reducing global oil supply by 20% — the largest supply disruption in history — though the markets seem reluctant to absorb this reality fully.

 

The reduction in global supplies due to Hormuz restrictions is set to exceed 400 million barrels and is reflected in declining inventories, primarily in Asia. Globally, inventories have fallen by 3%; however, when operational inventories are factored in, that figure rises to approximately 7%, according to our calculations.

 

Escalation: Trump’s Naval Blockade

In a new twist, President Trump reacted to the breakdown of negotiations in Islamabad by announcing that he would impose a naval blockade at Hormuz and would detain vessels that had paid a toll to the Iranians. The apparent objective of this blockade is to prevent Iran from exporting oil while it continues to block other countries' exports.

 

Global Responses to the Supply Shock

Worldwide, a series of events has helped mitigate the acute supply-demand imbalance, particularly through the management of strategic reserves. However, military actions have negatively impacted installations across the region:

 

•       Iranian missile and drone attacks have reduced Saudi Arabia’s oil production capacity by approximately 600 thousand barrels per day (MBPD) and have reduced the flow through its East-West pipeline by approximately 700 MBPD, according to the Kingdom’s Ministry of Energy. The East-West system has become one of Saudi Arabia’s main export routes, transporting crude from the Persian Gulf to the Red Sea and bypassing the Strait of Hormuz. One of the pipeline’s pumping stations was struck, limiting its flow. At the same time, direct damage to upstream facilities disrupted barrel supply: the Manifa field lost approximately 300 thousand barrels per day (Mbpd) of capacity, and prior damage at Khurais accounts for an additional 300 Mbpd. Saudi Arabia’s Ministry of Energy announced on Sunday that its East-West pipeline and other facilities had been restored following Iranian attacks on targets across the Gulf.

 

•       Indonesia asked its liquefied natural gas (LNG) and crude oil producers to prioritize the domestic market to secure its own oil and gas supply. The government will not issue export approvals for LNG this year except for cargoes already under contract. The government also expects to receive additional LNG cargoes later this year from the Bontang plant, supported by gas production from fields operated by Italian company ENI.

 

•       Japan’s largest power generation company, Tokyo Electric Power, expects the world’s largest nuclear reactor, located at Kashiwazaki-Kariwa, to resume commercial operations on April 16 — a boost toward reducing the country’s costly dependence on LNG imports.

 

•       In a display of policy adaptability, Mexican President Claudia Sheinbaum announced plans on Wednesday to exploit unconventional natural gas deposits in an effort to reduce her country’s dependence on foreign energy, at a time when the war with Iran is disrupting global energy markets. Sheinbaum avoided using the terms “hydraulic fracturing” or “fracking,” describing it instead as a drilling method for extracting oil and natural gas from deep underground using high-pressure liquid, and framed the initiative as a pursuit of “sustainable” extraction, emphasizing that environmental impacts would be minimized. Separately, an explosion at the coker units of the Dos Bocas refinery in Mexico put pressure on the domestic market.

 

•       China has granted additional crude oil import quotas to private refineries to ensure that the domestic product market remains well supplied amid Middle East disruptions that have forced state refineries and some large independent operators to cut production. Several Chinese independent refineries, backed by the new import quotas granted by Beijing, began seeking crude cargoes for immediate delivery following Wednesday’s oil price collapse, according to three trading sources.

 

PRICE DYNAMICS

Crude oil prices experienced high volatility this week, marked by a peak early in the week, followed by a sharp drop after the Middle East truce announcement, with the week closing in a downward trend but remaining elevated compared to prior years.

 

However, uncertainty about the agreement's durability kept prices higher than in the pre-crisis period. Despite the weekly decline, crude has shown an upward year-on-year trend, with a cumulative increase of more than 50% compared to the same period of the prior year.

 

In any case, the issue that concerns the Trump Administration most — domestic U.S. gasoline prices — is projected to take at least two weeks to reflect the decline, due to restocking constraints at gas stations.

 

If we believe that the interests of both parties point toward a restoration of transit through Hormuz, crude prices will continue to trend toward normalization around $70/BBL, albeit with high volatility. If, on the other hand, transit remains blocked, prices will climb back above $120 per barrel.

 

As things stand, benchmark crudes Brent and WTI closed on Friday, April 10, 2026, at $95.2/BBL and $95.8/BBL, respectively — a decline of more than 13% from the prior week’s close. On Monday, markets reflected Trump’s threats to blockade the Strait of Hormuz for tankers carrying Iranian crude or those that had paid a toll to Iran, with prices climbing back above $100/BBL.

 

VENEZUELA

Between Euphoria and Disillusionment

Venezuela is going through a phase — not for the first time in recent years — characterized by hope that the political and economic situation will improve, alongside objective indicators that such hope may be unfounded, though not impossible.

 

There is considerable uncertainty surrounding the achievements of what has been called the stabilization and recovery phases, under the "guardianship" of the Trump Administration. The doubts likely stem from an economy marked by sharp currency devaluation but featuring sector-level growth projections. The exchange rate market has failed to curb the bolívar's depreciation, despite a substantial increase in foreign-currency availability resulting from a nearly 50% rise in Venezuelan basket prices. The problems appear to be related to the manner in which the Central Bank conducted its auctions and, more recently, to interventions at exchange rates set by the institution. This recently implemented mechanism appears to have narrowed the gap between the official and parallel rates. Behind the scenes, it is mentioned that the Trump Administration is pressing for the replacement of the BCV’s board with a professional directorate. The IMF is conducting a consultation among its members on the recognition of the interim government and the consequent resumption of relations with Venezuela.

 

Meanwhile, oil production recovery, which showed some signs of momentum in the first quarter, has yet to reflect a change in trend relative to the growth achieved under OFAC licenses in 2023 and 2024.

 

Regarding the pace of economic recovery, the absence of a political transition process and the final phase of Marco Rubio’s three-stage plan have slowed the conversion of initial interest — following January 3 — into investment and activity. On the subject of hydrocarbon industry recovery, at least two schools of thought exist:

 

•       Those who see Venezuela as a key player in shaping the global oil future. Its vast resources and distance from the geopolitical flashpoint of the Middle East make it a key piece in hemispheric energy security under U.S. tutelage and support. This camp holds that Venezuela is at the beginning of a period of double-digit growth.

 

•       The other camp, without contradicting the long-term oil vision, perceives that many of the ills that caused the collapse of the national oil industry — including discretionary practices, lack of transparency, corruption, absence of separation of powers, and territorial security issues, among others — not only persist, but there appears to be no willingness to eliminate them. This group also contends that part of the current euphoria rests on today’s oil prices, inflated by the supply shock, a phenomenon that may prove cyclical, as has been the case so many times before.

 

Social Tension and Protests

While analysts, financiers, and investors debate between these two visions, social tensions are rising due to the unresolved wage crisis, leaving the population increasingly unable to meet even its most basic needs. As a result, popular protests have re-emerged.

 

On Thursday, April 9, large marches were held in several cities, led by unions, pensioners, and students, demanding fair wages amid inflation exceeding 600%. The government resorted to its traditional playbook, repressing the marches — particularly in Caracas — and swelling the ranks of political prisoners. The release of political prisoners and the number of those granted amnesty have slowed, and collateral processes such as the closure of El Helicoide have not been carried out; to the contrary, disturbances and human rights violations are being reported at El Rodeo prison.

 

The demonstrations were partly a protest against the interim president’s unfulfilled promises of a “responsible increase” in wages for May 1, acknowledging that the current minimum wage is inadequate given that a basic household basket costs $645 and that the bolívar has depreciated 549.7% over the past year.

 

Investor Interest in Hydrocarbons

Interest in investing in Venezuela’s hydrocarbon sector remains high. A significant number of companies have visited the country and engaged consultants to assess the competitiveness of opportunities. However, as noted above, the conversion of interest into actual investment has been relatively limited. Both ExxonMobil and ConocoPhillips sent technical teams to evaluate opportunities and the state of infrastructure and public services.

 

In the natural gas sector, there is a comprehensive rethinking of the relationship between Trinidad and Venezuela. Shell and Trinidad’s National Gas Company are accelerating plans to develop the Dragon gas field in Venezuela to supply gas to the liquefaction plant in Trinidad. According to statements made to Reuters by Trinidad’s National Gas Company president Gerald Ramdeen, the company, in partnership with Shell, plans to begin natural gas production in 2027 at the offshore Loran-Manatee field, which straddles the border between the two countries. Loran holds reserves of 7.3 TCF, while Manatee has estimated reserves of 2 TCF. Loran was discovered by PDVSA in 1981, and Chevron is currently PDVSA’s partner in the gas license for the Venezuelan side of the block. Reportedly, Chevron is relinquishing these gas licenses as part of negotiations for the Ayacucho 8 block in the Orinoco Oil Belt.

 

OIL OPERATIONS

Weekly Production

This week’s production stood at 892 thousand barrels per day (Mbpd) with no adverse effects reported from power outages or blending capacity constraints for Orinoco Belt crude. The geographic breakdown was as follows:

 

Region	Mbpd
West	247
East	110
Orinoco Belt	535
TOTAL	892

 

Mixed Companies Under OFAC Licenses and LOH Contracts

Mixed companies operating under OFAC licenses and new contracts established under the recently amended Hydrocarbons Organic Law (LOH) — under the modality of contracting the private minority partner as “Operator” — are producing the following volumes:

 

Company	Mbpd
Chevron	243
Repsol	47
M & P	27

 

Orinoco Belt Mixed Companies with Chinese and Russian Partners

Company	Mbpd
PetroSinovensa	94
PetroMonagas	87

 

Refining

Venezuela’s domestic refineries processed 236 Mbpd of crude and intermediate products, yielding 73 Mbpd in gasoline and 76 Mbpd in diesel.

 

We estimate that the Venezuelan basket price reached $86.2/BBL.

 

 

[1] International Analyst

[2] Nonresident Fellow, Baker Institute

A War with No Clear End

El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA 

 

When the joint air forces of Israel and the United States attacked Iran and, among other objectives, succeeded in eliminating a significant number of its leaders —including Supreme Leader Ali Khamenei— a rapid collapse of the regime was expected. After all, only weeks earlier, the Iranian population had taken to the streets demanding political change and had been violently repressed, suggesting deep dissatisfaction with the theocratic regime.

However, to the surprise of many, including the White House, what was expected to be a limited-duration military operation has turned into a war with no foreseeable end. Following its initial retreat, the Tehran regime adopted a strategy based on responding to Israeli-American attacks with missiles and drones aimed at damaging neighboring countries, particularly those hosting U.S. military bases. This strategy was soon complemented by its most important element: using hydrocarbon supply as a weapon of war, extending the conflict’s impact to the global economy.

As of today, the conflict in the Middle East is beginning to generate an unprecedented global energy and geopolitical crisis, in which the Strait of Hormuz has become, for the White House, a modern version of the Greek myth of Scylla and Charybdis. Faced with this turn of events, President Trump has opted for a combination of escalation threats and optimistic statements about the duration of the conflict, in an attempt to mitigate the impact on oil prices; a strategy that already appears to be losing effectiveness. The sustained increase in oil prices reflects a deeper crisis.

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Diplomatic Initiatives and Current Scenario

Attempts to find a diplomatic solution have so far been unsuccessful. Iran rejected U.S. demands with an equally extreme counterproposal, to which Washington responded with threats of a destructive campaign that would likely deepen the global economic crisis. Nevertheless, on March 31, Pakistan and China presented a joint five-point peace initiative —the first time a major power has formally proposed a path to end the conflict. Saudi Arabia and the United Arab Emirates are also engaged in unofficial talks.

Although navigability in the Strait of Hormuz has slightly improved —with 10 to 12 vessels transiting daily— the crude deficit remains high. Iraqi crude exports via Turkey, Saudi crude via the Yanbu terminal, and Emirati crude via the Fujairah terminal, combined with tankers that managed to bypass the strait, have reduced the deficit from 8 million barrels per day (MMbpd) to 6.5 MMbpd. Immediate physical availability of WTI has driven competition for those cargoes, reversing the traditional Brent differential —a phenomenon not seen since 2020.

No material increase has been observed among alternative producers, such as those in the United States. However, Baker Hughes reported a modest increase of 6 rigs operating in shale oil and natural gas basins. Monitoring this activity could become a short-term market indicator. Globally, a net reduction of 54 rigs was recorded, possibly in response to supply issues and the one-month lag in international data.

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Geopolitical Fundamentals

Parallel with the War in Ukraine

As the war against Iran —now just over a month old— progresses, notable similarities are emerging with the four-year war resulting from Russia’s invasion of Ukraine. In conventional terms, Ukraine could not contain Russian advances due to its limited size and equipment, prompting it to develop a decentralized, iterative, and low-cost combat model. The backbone of this model is the massive use of locally manufactured drones, produced in small, geographically dispersed workshops that are difficult to detect and costly to destroy. This strategy not only halted Russian advances but also enabled territorial recovery and materially impacted Russia’s oil infrastructure, critical to financing its war. These attacks forced Moscow to impose a temporary ban on fuel exports due to domestic shortages.

Iran’s Strategy: Decentralization and Asymmetric Warfare

A similar pattern is unfolding in the Middle East. Despite the dismantling of its central government and the disabling of its conventional air and naval systems, Iran has decentralized command within the Revolutionary Guard and, leveraging an impressive inventory of missiles and drones, shifted from defense to offense. It has inflicted damage on military installations and industrial infrastructure across the region, even making good on its threat to close the Strait of Hormuz. The closure of this vital artery has reshaped the global energy landscape and forced several countries to adopt drastic measures to address current and future shortages.

Europe’s Position and NATO

President Donald Trump called on European countries to participate in forcibly reopening the strait, a request that was rejected despite Europe —along with Asian powers— being among the most affected regions. Europe’s reaction surprised no one: there is little appetite to become involved in the conflict, and there appears to be an opportunity to settle scores with the White House without fully weighing its own energy costs. Trump has threatened to withdraw from NATO, which would represent another collateral benefit for Russia stemming from this conflict.

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Scenarios for the Strait of Hormuz

It is difficult to project what will happen in the coming weeks and months. Three possible scenarios are outlined:

• Short closure. Diplomatic or military progress leads to reopening the strait in May, aligning with U.S. estimates of the conflict’s end. Geopolitical risk would decrease, and prices would tend to normalize, though unlikely to return to pre-conflict levels.
• Gradual reopening. Non-belligerent but heavily affected countries—China, India, Japan, and Korea—pressure the parties, and traffic through the strait begins to normalize. Full navigation would resume by late June, but crude prices would remain above $80/BBL due to collateral damage and persistently high freight rates.
• Prolonged closure. Hostilities persist, and the U.S. decides to seize and control the strait militarily. Prices, due to reduced supply over nearly four months, would exceed $120/BBL and remain above $90/BBL even after reopening, given damage to Gulf production capacity and extreme regional instability. China, in particular, would not welcome U.S. control over its oil supply.

In any case, the only certainty is that this war could evolve into a permanent low-intensity conflict that destabilizes the energy market, making price levels difficult to determine and demand impacts hard to quantify. LNG supply, in particular, will be affected for a longer period due to damage to production infrastructure.

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Alternative Routes and Gulf Capacity

Persian Gulf countries are maximizing capacities to bypass the Strait of Hormuz. Saudi Arabia has loaded around 5 MMbpd at its Yanbu terminal in the Red Sea. The UAE has utilized its Fujairah terminal in the Gulf of Oman, which has a capacity of nearly 2 MMbpd. Iraq continues exports via Turkey and is preparing to reactivate an old pipeline through Syria to export an additional 50 Mbpd via the Mediterranean. Long-term, a multinational project is being evaluated to route significant volumes through pipelines terminating in Haifa.

According to Tanker Trackers, since March 1, only 108 tankers have transited the strait—an average of 3 vessels per day. Iran has declared Iraqi tankers exempt from navigation restrictions, highlighting its intent to use the strait as a political instrument.

So far, global inventory—including floating storage—has declined by 2.5%.

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Impact on the U.S. and Western Markets

Although the Western Hemisphere is well supplied with crude and natural gas—and is increasing exports to Asia and Europe—it is not immune to rising global prices, which affect domestic fuel prices —a highly sensitive political issue, particularly in the U.S.

Due to supply disparities, the historical Brent-WTI differential has inverted, with WTI now trading above Brent, driven by extreme demand for immediate U.S. crude. This “delivery capacity crisis” has created extreme backwardation, with buyers paying a premium for immediate delivery.

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Price Dynamics

Oil prices were highly volatile during the week, with Brent fluctuating between $98 and $119/BBL.

By week’s end, prices surged again due to tensions between U.S. and European authorities and uncertainty following President Trump’s latest televised address.

Brent and WTI closed on Friday, March 27, 2026, at $109.03/BBL and $111.54/BBL, respectively, with Brent trending higher, particularly in Western Hemisphere markets.

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U.S. Macroeconomic Outlook

A positive development was the creation of 178,000 jobs in March, with unemployment falling to 4.3%. Average hourly wages grew 3.5% year-on-year, while inflation was 2.4–2.7%, indicating real wage growth.

However, this positive outlook may soon reverse as the economic impact of the Iran conflict becomes evident in April and May data. Additionally, Federal Reserve policy could be affected: markets had anticipated rate cuts this summer, but current data cast doubt on that forecast.

In summary, higher inflation, recessionary pressures, increased energy investment, and realignment of defense spending are expected.

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Eastern Mediterranean Exploration and Gas Developments

Despite ongoing events, the energy industry continues operating. ExxonMobil recently declared the Glaucus and Pegasus gas discoveries south of Cyprus commercial, with 7 TCF of recoverable resources. Together with ENI’s discoveries near Egypt and Chevron’s operations in Israeli waters, a major gas province is emerging, contributing to European and regional energy security.

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Venezuela

Trump Rewards Delcy Rodríguez

During Holy Week in Venezuela, the Trump administration acted. On April 1, the U.S. Treasury removed Delcy Rodríguez from its sanctions list. This OFAC decision, along with the reopening of embassies and consulates, marks a significant shift in U.S. policy toward Venezuela.

It is unclear what the U.S. obtained in return: political prisoners remain jailed, and basic freedoms remain constrained. Adding to the ambiguity, Secretary of State Marco Rubio met with María Corina Machado in Washington, reaffirming her relevance.

Economy and Exchange Rate

Economic challenges persist: the official exchange rate exceeded Bs 470/$, with a 40% gap versus the parallel market, sustaining inflation above 600%.

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V. Oil Operations

Crude Production

Production stabilized at 884 Mbpd:

·       West: 242

·       East: 110

·       Orinoco Belt: 532

Joint Ventures (OFAC Licensed)

·       Chevron: 242

·       Repsol: 45

·       M&P: 27

·       Subtotal: 314 (35%)

Refining and Exports

·       Refining: 240 Mbpd

·       Gasoline: 75 Mbpd

·       Diesel: 76 Mbpd

Exports averaged 770 Mbpd.

Export Destinations

·       India: 340

·       U.S.: 313

·       Spain: 85

·       Italy: 32

Export Blends

·       Merey 16: 552

·       Boscan: 114

·       Hamaca: 68

·       DCO: 36

Revenues

The Venezuelan basket reached $87.4/BBL. Monthly revenues totaled $1.956 billion.

[1] International Analyst
[2] Nonresident Fellow, Baker Institute