The United Arab Emirates said it will leave OPEC and OPEC+ on 1 May, Reuters reported. The move follows a review of its energy strategy.
The decision comes during rising tensions linked to conflict with Iran. Threats to the Strait of Hormuz are putting Gulf exports under pressure.
Strait Of Hormuz Risks
The Strait is a chokepoint for a large share of global Oil and Liquefied Natural Gas (LNG) flows. Disruption has affected wider energy supply routes.
The UAE’s exit reduces the size of a group long led by Saudi Arabia. It may add to fractures over production quotas and policy direction.
Reuters reported that officials want an energy plan that fits wider national priorities beyond Oil. The report also linked the timing to concerns over regional support after multiple attacks during the conflict.
In markets, WTI briefly fell to about $96 after the news. It later rose to around $97.60, up 2.8% on the day.
Trading Implications And Volatility
With the UAE set to leave OPEC+ on May 1st, we are facing a period of intense uncertainty in the oil markets. The immediate conflict is between a potentially bearish supply increase from the UAE and a very bullish geopolitical risk premium tied to Iran. This tension makes directional bets risky, suggesting that volatility itself will be the most important factor for traders in the coming weeks.
We anticipate the UAE could add over 1 million barrels per day to the market relatively quickly, as it is no longer bound by quotas. This would challenge the 5 million barrel per day spare capacity cushion that the EIA reported the rest of OPEC holds. This potential flood of oil could cap any price rallies if tensions in the Strait of Hormuz do not escalate further.
However, the threat to the Strait of Hormuz, through which nearly a fifth of the world’s daily oil supply travels, cannot be understated. Any disruption there would immediately overshadow the UAE’s extra production, creating a scenario for a massive price spike. We saw a similar risk premium added in 2025 after initial clashes, which sent prices above $110 for a brief period.
Looking back, we remember the OPEC+ fallout in 2020, where a price war briefly sent WTI futures into negative territory. While the current demand situation is much stronger, it shows how quickly coordinated supply policy can unravel into a battle for market share. This history suggests traders should be prepared for moves that seem extreme by recent standards.
Given this uncertainty, the most prudent derivative strategies may involve buying volatility rather than picking a direction. We are seeing implied volatility in options contracts for June and July delivery surge, with the CBOE Crude Oil Volatility Index (OVX) pushing toward 50, a level not consistently seen since the market turmoil of 2022. Buying options, such as straddles or strangles, could allow traders to profit from a large price swing in either direction.
The spread between Brent and WTI crude should also be watched closely as an indicator of market stress. Historically, this spread widens during periods of Middle East conflict, as Brent is more directly exposed to disruptions in the region. A widening spread would signal that the market is pricing in a higher probability of a supply shock emanating from the Gulf.
