A 'race against time.' Hormuz closure could push Brent to $150 a barrel by summer, warns Morgan Stanley.

By Barbara Kollmeyer and Isabel Wang

Oil prices tick higher as Iran and U.S. reject each other's peace proposals

While global oil prices have so far managed to avoid a sharper rally from the U.S.-Iran conflict, Morgan Stanley is warning it's now a "race against time" to prevent Brent from hitting $150 a barrel by summer.

The latest caution from Wall Street comes as neither Iran nor the U.S. appeared ready to accept each other's peace proposals over the weekend. West Texas Intermediate crude for June delivery (CL.1) (CLM26) rose 1.6% to $98.94 a barrel on Monday, after dropping 6.4% to $95.42 a barrel last week amid rising hopes over a long-awaited resolution.

Global benchmark Brent crude futures for July delivery (BRN00) (BRNN26) rose 1.8% to $103.13 a barrel. Brent fell 6.4% to $101.29 a barrel last week.

"I have just read the response from Iran's so-called 'Representatives.' I don't like it - TOTALLY UNACCEPTABLE!" President Donald Trump posted on his Truth Social account on Sunday.

Iran has responded to the latest U.S. proposal with demands to end the hostilities, reopen the Strait of Hormuz gradually to commercial traffic, and for the U.S. to lift its block on Iranian vessels and ports, The Wall Street Journal reported. But the two sides appear far apart on nuclear issues.

But in an interview that aired Sunday night on "60 Minutes," Israeli Prime Minister Benjamin Netanyahu said the war wasn't over, and suggested entering Iran to physically remove the nuclear material as part of any deal.

An oil buffer at the outset of the conflict and market confidence over a reopening of the Strait of Hormuz have kept oil from reaching 2022 levels, a team of Morgan Stanley strategists led by Martijn Rats told clients in a note on Monday.

Surging U.S. seaborne oil exports and China's willingness to pare back on its own seaborne imports have also helped shield the world from higher prices. And while Morgan Stanley expects a reopening of the waterway, they warned that a "closure longer than China or the U.S. can sustain current flows could cause renewed tightness."

China could likely sustain the current situation for months and even for the "balance of the year," but U.S. inventories are under more pressure, said Rats and his team. Their most bullish case for Brent was that it reaches $130 to $150 a barrel if U.S. and Chinese buffers run low, "before reopening relief arrives."

Read: Oil market won't return to normal this year if Iran conflict isn't solved within weeks, Aramco CEO says

"A reopening in June with U.S. and Chinese buffers still partly intact is the base case; a closure that runs into late June or even July is the regime in which Brent flat price has to do work it has so far been able to avoid," said Rats and his team.

Their base case sees Brent at $100 a barrel by the third quarter and $90 a barrel by the fourth quarter before moving back to $80 a barrel through 2027.

-Barbara Kollmeyer -Isabel Wang

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05-11-26 0946ET