Oil markets were thrown into renewed volatility after the United Arab Emirates confirmed its exit from OPEC and the wider OPEC+ alliance, a move that has unsettled traders already grappling with the ongoing Iran conflict and disruptions in the Strait of Hormuz.
The UAE announced on Tuesday that it will formally leave the oil producers’ group on Friday, ending decades of membership. The decision immediately injected uncertainty into global energy markets, with investors weighing the prospect of higher future Emirati output against the risk of worsening geopolitical instability across the Middle East.
Prices reacted sharply in both directions. Oil futures initially fell by around 2–3% as traders priced in the possibility of increased supply from the UAE outside OPEC quotas. However, losses were quickly reversed as risk premiums returned, driven by fears that supply routes could deteriorate further.
At the time of reporting, Brent crude stood above $112 per barrel, while US benchmark West Texas Intermediate hovered above $105, both still significantly elevated despite intraday swings.
The UAE’s departure follows long-standing tensions within OPEC over production limits. Abu Dhabi has invested heavily in expanding its oil capacity through the state-owned Abu Dhabi National Oil Company, with more than $150 billion committed to boosting output to five million barrels per day. However, OPEC restrictions have prevented full utilisation of that capacity, pushing the UAE toward a more independent strategy.
Analysts say the exit marks a major fracture in the organisation’s cohesion. Maurizio Carulli, global energy analyst at Quilter Cheviot, said OPEC’s influence is now constrained by geopolitical realities. “Until tanker traffic through the Strait of Hormuz is safe again, OPEC’s ability to stabilise prices is sharply limited,” he noted, adding that US producers are gaining greater market influence.
Despite the political rupture, energy equities have remained relatively strong, supported by elevated prices. Integrated oil majors are expected to benefit significantly from sustained volatility.
The broader market backdrop remains defined by the continued closure of the Strait of Hormuz, through which roughly 12% of global oil supply normally flows. The waterway remains blocked amid the Iran-US standoff, with negotiations stalled despite a fragile ceasefire.
Iran has proposed reopening the Strait in exchange for an end to US naval restrictions and sanctions relief, while Washington continues to demand full nuclear compliance and unrestricted maritime access.
President Donald Trump has described Tehran’s latest proposal as “better than before” but has not accepted it, instead maintaining pressure on Iran’s leadership.
With supply chains constrained and diplomatic talks stalled, analysts warn that energy markets are entering a prolonged period of instability, where both geopolitical risk and shifting alliances are likely to dictate price movements rather than production fundamentals alone.
