M. Juan Szabo [1] y Luis A. Pacheco [2]
Armed conflicts in the Middle East continue to be the primary geopolitical focus for energy markets. The ceasefire agreements — both between Hezbollah and Israel, and between the United States and Iran — remain in place despite ongoing violations, which have now become part of the “new normal.” The parties in conflict are paying no heed to each other’s infractions, driven by a shared interest in reopening navigation lanes: the Strait of Hormuz, restricted by the Iranian Revolutionary Guard, and the Gulf of Oman, restricted by the U.S. naval blockade.
Iranian control of the strait had proven to be a formidable weapon in its strategy against the United States, disrupting energy markets and global economies alike. However, it had also allowed Iran to maintain a near-uninterrupted flow of crude oil to China, India, Pakistan, and other Asian buyers. As a result, the economic collapse caused by Israeli and U.S. strikes against Iran’s infrastructure was being cushioned by the continued stream of oil export revenues.
Caught off guard by this strategy, the United States responded by imposing a blockade on tankers and other vessels sailing to or from Iranian ports, effectively neutralizing Iran’s approach. The impact was twofold: Iran’s revenues were sharply reduced, and the country lost its ability to receive shipments of components needed for missile and weapons production, allegedly sourced from China. To date, more than 30 tankers have turned back following the immobilization and boarding of the Iranian vessel Touska, which had departed from China.
Fractures in the Regime and Signals of Negotiation
In a paradoxical turn of events, the possibility has emerged of brokering an agreement that would result in free passage through the strait, effectively sidelining the — never entirely clear — original objectives of the conflict. The initial negotiations and subsequent diplomatic feints appear to signal fractures within the Iranian regime. The Revolutionary Guard remains its most solid and radical pillar, despite the destruction of much of its air and naval capabilities. This forces civilian leaders to present a more “rational” face under external pressure while maintaining a precarious balance vis-à-vis the Guard’s hardliners.
Late on Saturday, Trump canceled the planned trip by his negotiators, Witkoff and Kushner, to Islamabad for a second round of talks. Trump may be convinced that the pressure is working, but the signals coming from Tehran are anything but clear. As we have noted in previous issues, big cultural differences between the parties make it difficult to establish a shared framework for negotiation — and, to date, no such framework appears to have emerged.
Impact on Energy Markets
In any event, markets — including energy markets — appear to view the unprecedented situation in Hormuz as a temporary disruption, preferring instead to focus on what they consider more structural: artificial intelligence, which currently commands market attention. Yet the physical evidence is unequivocal: the conflict in the Middle East is generating an economic tsunami that will manifest first as shortages of a range of commodities and products, driving up prices, disrupting supply chains, and ultimately generating inflation that will demand complex responses from energy producers and consumers alike. Central banks will be forced to define monetary policies that could reshape economies for months, if not years.
Without wishing to be alarmist, it is important to draw a critical distinction: energy being expensive is one thing; barrels of oil or molecules of gas being physically unavailable is quite another.
Russia, China, and the Reconfiguration of Supply
Meanwhile, Russia — not directly involved in the conflict — has benefited from rising prices, the easing of U.S. sanctions, and the resumption of oil flows through the Druzhba pipeline to Hungary and Slovakia. Russia has managed to stabilize its oil production at 9.1 million barrels per day. However, its refined products market has suffered as a result of ongoing Ukrainian drone strikes against its refining infrastructure.
China, for its part, may be poised to play a more prominent role, given its considerable influence over Iran at a time when Iran’s primary supply is faltering. There are reports that Arab nations have been pressuring China to cooperate in resolving the Middle East crisis. Furthermore, if it is confirmed that the vessel Touska was carrying sensitive military materiel from China, this would place both countries in an awkward position ahead of the Trump-Xi summit scheduled for May.
Geopolitical Fundamentals
Negotiations and Iran’s Internal Divisions
The latest cancellation of the U.S. negotiators’ trip to Pakistan reflects, at least from President Trump’s perspective, that the divisions within the Iranian regime and the success of the blockade on Iranian ports are complicating the country’s internal situation, making an agreement unlikely — though Trump did not rule out negotiations by telephone.
Iranian Foreign Minister Abbas Araghchi traveled to Moscow after meeting in Pakistan with army chief Asim Munir, with whom he shared what he described as a “viable framework to end the war,” while questioning the United States’ commitment to diplomacy.
Simultaneously, the authorization granted to the U.S. Navy to neutralize fast boats involved in laying naval mines or conducting disruptive activities in the Strait of Hormuz is a preparatory measure to secure the opening of that waterway. On another front, the ceasefire between Israel and Lebanon remains in effect. However, it has not prevented violent incidents: in response to a Hezbollah missile launch, Israeli forces eliminated fifteen members of the group on Lebanese soil.
The Transatlantic Rift: The U.S. and Europe
Over recent days, alongside the central issue looming over the Persian Gulf region, relations between the United States and Europe have grown increasingly strained. The Trump administration has adopted a “maximum pressure” posture that applies not only to its adversaries but also to its traditional allies, whom the president believes are unwilling to understand or confront the new global geopolitical realities. Europeans, for their part, caught up in their own domestic challenges, are beginning to recognize that the post-1945 order is dysfunctional and that they must define a new strategy centered on their own interests.
For the United States, Europe has become a burden rather than an ally. The European Union (EU) is attempting to distance itself from U.S. belligerence, prioritizing diplomacy and economic stability. While the U.S. maintains its offensive posture, EU leaders are meeting in Nicosia (Cyprus) with representatives of Arab countries to address peace in the region and security in the Strait of Hormuz — a policy that some analysts liken to the approach taken by France and the United Kingdom in the 1938 Munich Agreement with Italy and Germany, in an effort to avert World War II. Paradoxically, other analysts apply the same label to the White House’s stance on the Russia-Ukraine conflict.
On April 18, in Barcelona, the fourth “In Defense of Democracy” summit took place, with the participation of heads of state and political leaders from Latin America and Europe. Notable attendees included Spanish Prime Minister Pedro Sánchez, Mexican President Claudia Sheinbaum, Brazil’s Luiz Inácio Lula da Silva, Colombia’s Gustavo Petro, Uruguay’s Yamandú Orsi, and Chile’s Gabriel Boric. They presented a united front to what they described as the advance of far-right policies —specifically those of the Trump administration —to “protect democracy and European cohesion.” This is not an auspicious moment for the transatlantic alliance.
Sanctions on China and the Scale of the Supply Disruption
In line with the maximum pressure doctrine, the Trump administration announced on Friday that it is imposing economic sanctions on the Hengli Petrochemical refinery in the port city of Dalian, which has a processing capacity of 400,000 barrels per day (400 Mbpd), making it one of China’s largest independent refineries. Approximately 40 shipping companies and tankers involved in transporting Iranian oil were also sanctioned. These measures, which cut targeted firms off from the U.S. financial system and penalize any entity doing business with them, come just weeks before the planned meeting between Trump and Chinese President Xi Jinping in China.
We are witnessing the most significant oil supply disruption in recent world history. The conflict involving Iran has paralyzed approximately 20% of global oil and LNG flows. But beyond the inability to connect with international markets — which could be resolved through a negotiated agreement — serious damage has been inflicted on the region's production infrastructure, which will take years to repair. Consumer countries will have to grapple with financing the physical recovery of facilities, a supply gap, saturated inventories, and an unprecedented lack of global spare production capacity.
Indeed, the volume of crude oil and natural gas shut in or stockpiled and unable to reach the market has exceeded 500 million barrels (500 MMBBL) and 420,000 BCF, respectively. Damaged refineries have stopped supplying nearly 40% of gasoline and aviation fuel to Asia — primarily China, India, and Pakistan — and 30% of aviation fuel to Europe. As a concrete illustration of the repercussions, Pakistan has only 15 days of inventory remaining, and Lufthansa has canceled 20,000 flights for the remainder of 2026.
As mentioned in the introduction, the flow of oil from Russia to Hungary and Slovakia via the Druzhba pipeline resumed early Thursday, following the restoration of supply through Ukrainian infrastructure after a nearly three-month disruption. Slovakia and Hungary are the last EU member states still receiving Russian oil via this route.
The United States has done little to stimulate higher production; in fact, the Energy Information Administration (EIA) has reported a slow decline to just over 13.5 MMbpd. Drilling and hydraulic fracturing activity remains stagnant, despite rising crude prices and the pressing need for additional supply. Markets are questioning whether the production increases forecast by the International Energy Agency (IEA) will materialize.
Price Dynamics
Over the past week, international hydrocarbon prices experienced high volatility, with an overall upward trend driven by geopolitical uncertainty in the Middle East and discouraging progress in diplomatic negotiations to reopen the Strait of Hormuz.
Although crude oil prices registered a significant weekly gain of $15 per barrel, energy markets closed the week under uncertainty as it became clear that the United States is unwilling to engage in indirect negotiations and that the wartime footing appears to be gaining ground. As a result, energy markets opened Monday with an upward bias in hydrocarbon prices.
Benchmark crudes Brent and WTI, at market close on Friday, April 24, 2026, were trading at $105.33/BBL and $94.40/BBL, respectively, representing increases of more than 15% from the previous week’s close.
Venezuela
More of the Same
While the caretaker administration of Delcy Rodríguez attempts to consolidate its hold on power under the cover of purported U.S. pressure to establish an electoral timeline, Venezuela is mired in a critical phase of stagnation in its long-sought political transition. The caretaker administration is struggling to stabilize an economy showing faint signs of recovery. At the same time, institutional fragility persists, and uncoordinated decisions regarding foreign exchange availability, public spending, liquidity restriction policies, and exchange rate intervention persist.
Although a doubling of foreign-currency availability — driven by higher oil prices — managed to narrow the exchange rate gap from 40% to 30%, the goal of containing inflation remains elusive, manifesting instead as a generalized rise in prices.
The caretaker president formally requested that the International Monetary Fund (IMF) grant access to the $5 billion in SDRs (Special Drawing Rights), an international reserve asset created by the Fund.
The “Great Pilgrimage for a Venezuela Free of Sanctions and at Peace”
On the political front, the caretaker government’s attention has been focused on what it has branded the “Great Pilgrimage for a Venezuela Free of Sanctions and at Peace”: a 13-day mobilization convened by caretaker President Delcy Rodríguez, which began — not by coincidence — on April 19, 2026, and is scheduled to conclude on May 1 in Caracas. According to the regime, this initiative aims to demand the full lifting of international sanctions and to promote national unity. However, it appears to be more of an out-of-cycle electoral campaign.
The Rodríguez siblings and other senior officials have led different routes and activities at various strategic points across the country:
• Delcy Rodríguez has led events in states such as Zulia (starting point of the western route), Falcón, and Lara, visiting landmarks including the “La Flor de Venezuela” monument and the Sanctuary of the Divine Shepherdess.
• Jorge Rodríguez, President of the National Assembly, began his tour in the state of Amazonas and has participated in mobilizations in Bolívar, Lara, Portuguesa, and Delta Amacuro. In his speeches, he has emphasized that the march is a process of “spirituality and healing” for the country.
• Figures such as Diosdado Cabello have led segments departing from border states such as Táchira.
With clear electoral objectives, the design of the mobilizations seeks to give the Chavista revolution a new face by imbuing it with political-religious content and subliminally evoking analogies to the Camino de Santiago pilgrimage and the procession of the Divine Shepherdess. The visual branding is laden with symbolism and is widely interpreted as a search for a new identity and electoral repositioning. The traditional red of Chavismo has been replaced by blue and white — the colors associated with the Virgin Mary. No PSUV party flags or partisan symbols are on display; rather, there is a clear emulation of María Corina Machado’s 2024 campaign aesthetic.
The mobilization is expected to reach Caracas on May 1, coinciding with a possible announcement of a minimum wage increase by the executive. The initiative has drawn criticism from opposition sectors and labor guilds, who question the expenditure on propaganda amid the wage crisis and the deteriorating public services affecting the country.
Delcy Rodríguez also announced the end of the Amnesty Law. This statement is not only legally dubious but constitutes an obvious violation of the separation of powers, a practice that has become commonplace across all incarnations of Chavismo.
The Maduro Case in the United States
Regarding the criminal proceedings against Nicolás Maduro and Cilia Flores in the United States, U.S. authorities reversed an earlier decision and will now permit both defendants to pay their attorneys using Venezuelan funds for their defense in the drug trafficking case filed against them in New York. This reversal removes an obstacle that had stalled the proceedings and, according to legal analysts, introduces a variable that could have significant implications for the course of the case — specifically, it eliminates the appeal based on lack of adequate legal representation that the defendants were apparently preparing.
Oil Operations
National Production
This week’s production stood at 904 Mbpd, with no adverse effects reported from power outages or limitations in the blending capacity of Orinoco Belt crude. The geographical breakdown was as follows:
Western Region | 256 Mbpd |
Eastern Region | 108 Mbpd |
Orinoco Belt | 540 Mbpd |
TOTAL | 904 Mbpd |
OFAC-Licensed Joint Ventures and LOH Contracts
Joint ventures operating under OFAC licenses and new contracts established under the recently amended Hydrocarbons Organic Law (LOH) produced the following volumes:
Chevron | 247 Mbpd |
Repsol | 47 Mbpd |
Maurel & Prom | 29 Mbpd |
Orinoco Belt joint ventures with Chinese and Russian partners produced:
PetroSinovensa | 91 Mbpd |
PetroMonagas | 87 Mbpd |
Drilling Activity
Baker Hughes reports two active drilling rigs in the country, both operated by Chevron. However, it is known that additional rigs are operable. A jack-up unit brought in by the Chinese company Concord Resources to operate in Lake Maracaibo suffered an accident that caused an oil spill; the unit has been used exclusively for workover operations on existing wells, with considerable difficulties due to its physical characteristics.
There is also a lake drilling rig at Urdaneta Oeste, contracted by Maurel et Prom, which is conducting workover operations ahead of its planned drilling campaign. Finally, a rig scheduled to drill in the Orinoco Belt (Junín) for PetroRoraima has experienced numerous setbacks and has been unable to commence drilling.
Refining and Exports
National refineries processed volumes of crude and intermediate products, with a diesel yield of 75 Mbpd. Gasoline production does not cover domestic market requirements.
Month-to-date exports show a strengthening of shipments to the United States, at approximately 330 Mbpd, alongside a decline in dispatches to India. Total exports for April are projected at 740 Mbpd.
The Venezuelan crude basket averaged $86.50/BBL.
[1] International Analyst
[2] Nonresident Fellow, Baker Institute
