The oil market is shifting quickly from a focus on war-related shortages to an emerging supply glut.

Why it matters: Oil prices drive inflation expectations, which in turn drive the interest rates that have been closely correlated to the stock market.

The latest: Spot prices for Brent crude oil — the global benchmark — and U.S. West Texas Intermediate have tumbled over the last three months.

• WTI is down roughly 39% to less than $70 a barrel, and Brent is about 33% to under $73.

The fine print: Those spot prices, which measure the cost of buying oil for near-term delivery, are now lower than the costs of buying futures for delivery over the next few months.

• Such a state of affairs, with lower prices today and futures prices that rise over time, is known as "contango" and is considered normal for oil markets.

Yes, but: The outbreak of the war in Iran upended that status quo, as short-term oil prices leapfrogged longer-term futures.

• This market phenomenon, known as "backwardation," signals extreme anxiety among buyers to get hold of crude immediately.

The big picture: The return to contango underscores how rapidly both the supply and demand have changed for oil, even though the war between the U.S. and Iran is far from officially resolved.

• Since the memo of understanding extending the ceasefire was signed, more tankers have started to move out of the Persian Gulf, and Gulf states have shipped more crude than expected.
• The OPEC+ oil cartel, meanwhile, has announced a plan to boost production.
• Simultaneously, more Russian crude is hitting the global market as Ukrainian refinery attacks forced Russia to divert supplies as exports.

The other side: That's all about supply. But analysts say demand — which has been much lower than expected recently — is just as important to explaining the drop in prices.

What they're saying: "China has radically reduced its oil imports," Gregory Brew, an analyst covering energy markets and Iran for the Eurasia Group, tells Axios.

• "The recovery in Middle Eastern supply is outpacing our initial expectations while Chinese-depressed import demand remains weak," wrote energy analyst Rory Johnston on his Commodity Context Substack.

What to watch: Given the uncertainty around China's return to the market, investors seem unsure if the current soft prices for crude will last.

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The U.S. is still projected to achieve two-thirds of the emissions cuts from power generation that would have occurred without the rollbacks of the Biden-era climate law and regulations, a new study concludes.

Why it matters: It puts an exclamation point on what we explored yesterday: low-carbon energy is surviving, in weakened form, despite the 2025 GOP budget law that slashed renewables subsidies.

🖼️ The big picture: Author Lily Bermel, a visiting fellow with Columbia's Center on Global Energy Policy, looked ahead at power sources and greenhouse gas emissions from 2025-2035.

• She found that the big picture on electricity was "glass half full" despite the "One Big Beautiful Bill Act" and rollback of several EPA rules.

⚽ State of play: It projects levels of fossil fuels vs. clean energy with and without the 2025 law and the removal of power plant regulations.

• 71% of new clean generation and 67% of emissions cuts will occur over those 10 years, relative to 2021 levels, compared to a scenario without the rollbacks, it finds.

🥊 Reality check: The 2025 law and executive policy changes under Trump 2.0 nonetheless have a big effect.

• Fossil fuels fill the gap, with coal plants shutting down more slowly as a result, and gas-fired plants running more. Total fossil generation is 19% higher over the study period.
• And while the paper released by MIT looks at electricity, the 2025 law also ended consumer electric vehicle subsidies, which has slowed sales growth.

📝 Of note: The modeling results — via the firm Energy Innovation's simulator — don't capture various headwinds and tailwinds for clean energy.

• Some of this "real-world context" backs the glass half full frame, the study states. Think Big Tech deals that support geothermal and nuclear projects, for instance.

🔍 What we're watching: Bermel calls for permitting reform and transmission buildout that would lift the "ceiling" on how fast clean power sources are added.

• That includes tech like geothermal and nuclear, which provide always available, "firm" generation that compliments intermittent wind and solar.

Another big goal is "managing" necessary gas use and new plants with stronger environmental standards on methane emissions and more.

The bottom line: "[T]he report's findings reduce the doom narrative that followed the OBBBA's enactment, showing that the transition slows but is not kneecapped, while acknowledging the pressing priority to close the gaps," Bermel writes in a summary.

Global natural gas demand is slated to dip by 0.5% this year, per new International Energy Agency projections.

The big picture: The Iran crisis tightened supply and damaged gas-using industries in the Middle East.

• Higher costs prompted switching to coal and other fuels in Asia, while prices and growing renewables curbed European use, the report notes.

The intrigue: Plenty has been written — in this newsletter and elsewhere — about how the crisis could hasten energy transition, but the report tells a story of a resilient gas market.

• "Despite the sharp loss of LNG exports from the Gulf, strong supply from other producing regions is expected to keep global LNG supply largely unchanged for the full year," IEA finds.

Yes, but: The findings assume the Strait of Hormuz "fully reopens" in the third quarter.

Catch up quick: The projected 2026 demand decline would be the third in the last seven years, following the 2020 COVID shock, and the 2022 fall when Russia's invasion of Ukraine caused surging prices in Europe and Asia.

What we're watching: A huge gas plant buildout may be looming in the U.S., driven by AI energy needs and more, though turbine availability will have its say.

• E&E News flags a wild stat: "At the start of 2025, EIA predicted that 23 gigawatts of new gas plant capacity would be built between 2026 and 2030. The agency's new forecast for that period: 66 GW."

🇸🇦 Via Reuters, Saudi Arabia may launch a project to expand capacity of its crude ​oil pipelines to the Red Sea, bypassing the Strait of Hormuz.

• Why it matters: The Iran crisis is encouraging fresh efforts to lower long-term reliance on the narrow waterway. The Saudis have already boosted volumes through the east-west pipeline system since the war started.

🛢️ Oil prices rose slightly after reported Iranian attacks on vessels in the Strait of Hormuz. Brent crude is up less than 1% to $72.53, but that's still not far from pre-war levels.

⛏️ Via Bloomberg, "The Trump administration is set to authorize South32 Ltd.'s planned $2 billion zinc and manganese mine in Arizona on Tuesday." It's part of a wider U.S. push to expand domestic mineral output.

That's how much new financing Proxima Fusion announced this morning led by XTX Ventures and East X Ventures, with Google and German power giant RWE among the backers.

Why it matters: The latest funding round values the Munich-based startup at $2.7 billion and makes it "the best-funded fusion company in Europe," the announcement states.

What's next: Proxima is building a demonstration fusion system in Munich, which it expects to bring online in the 2030s.

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