Fresh drone attacks in the Gulf caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia intercepted three drones on May 18, 2026 [1, 2]. The Strait of Hormuz remains closed to most shipping as Tehran seeks to formalize control of the strategic waterway, which normally handles 20% of the world’s oil trade [1, 2].
Brent crude traded between $110.63 and $111.34 per barrel, and US crude ranged from $106.42 to $107.72 per barrel on May 18, 2026, according to different sources [1, 2]. Capital Economics analysts warned that global oil inventories are draining rapidly due to the Strait’s closure, with supplies possibly reaching critical levels by the end of June. They said this could push Brent crude prices to $130–140 per barrel or higher [1].
The analysts added that if the Strait remains closed through year-end and oil prices stay near $150 per barrel into 2027, inflation in the UK and eurozone could approach 10%. That scenario could also push interest rates to recent peaks and trigger a global recession [1].
US President Donald Trump urged Iran to act "fast" to reach a deal to ease the tensions [1]. Meanwhile, G7 finance ministers gathered in Paris on May 18, 2026, to discuss the Strait of Hormuz and critical raw material supplies amid the ongoing geopolitical crisis [1, 2].
Global bond markets reacted sharply on May 15, 2026, as concerns mounted that elevated energy costs would sustain inflation. US 10-year Treasury yields surged about 23 basis points to roughly 4.58–4.63%, and 30-year yields jumped 18 basis points to around 5.11–5.16% [1, 2]. Japanese government bond yields also hit peak levels not seen since 1996, as authorities proposed issuing fresh debt to fund an extra budget cushion for economic fallout from the US-Israeli war on Iran [2].
Investors fear central banks worldwide will tighten monetary policy to contain inflation, with a Federal Reserve rate hike this year seen as a 50-50 chance [1, 2].
