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Brent crude oil prices surged past USD 125 a barrel amid stalled US-Iran talks and doubts over the Strait of Hormuz, despite the UAE's recent exit from OPEC. The anticipated relief from increased UAE production is hampered by ongoing geopolitical tensions and shipping disruptions in the crucial strait.

1. Brent crude oil prices surged past $125 a barrel.
2. UAE's OPEC exit didn't lower prices due to Iran war.
3. Strait of Hormuz closure disrupts global oil supply.

The price of Brent crude oil surged past USD 125 a barrel early Thursday as stalled US-Iran talks raised doubts over the reopening of the Strait of Hormuz and a permanent end to the Iran war. The massive jump in the prices came two days after the UAE said on Tuesday it was quitting the Organisation of the Petroleum Exporting Countries (OPEC), a bloc which if often dubbed as "oil cartel". Earlier, it was anticipated that the UAE exit from the group would uplift the production capacity of the country. The traders had predicted this would eventually help in lowering crude prices amid disruption in supply due to robust blocade in the Strait of Hormuz.

UAE exit OPEC: Story so far

UAE on Tuesday, announced it will leave both OPEC and the larger OPEC+ group on May 1. This was viewed as a measure to to let the country independently decide how much oil it produces and sells. Notably, UAE is one of the world's top ten oil producers. The country also has the capacity to increase its output by about one million barrels per day.

So, if the UAE chooses to ramp up production, could it put downward pressure on the price of oil once shipments can resume through the Strait of Hormuz?

With severe geopolitical tensions still disrupting the market, the immediate question is less about when we can expect cheaper oil and more about how the uncertainty feeds into what comes next.

Why no relief was seen despite UAE's exit from OPEC

As expected, the UAE exist does not mean consumers should expect immediate relief. Oil prices are still being shaped by geopolitical disruptions due to the Iran war. The Strait of Hormuz, which normally carries about a fifth of the world's oil and gas, remains effectively closed to shipping traffic, which has already caused major disruption. Simply put, UAE can increase its production but it is still dependent on Hormuz for its oil supply.