fiisual Biweekly Oil Report : The Strait of Hormuz and the Bab el-Mandeb Strait remain blocked; the ongoing geopolitical standoff means oil prices will continue to carry a risk premium over the long term
This biweekly report continues the theme of "rising geopolitical tension, constrained supply, and low inventories." Over the past two weeks, Brent and WTI rose 10.72% and 11.41% respectively, showing the market continues to raise its risk premium for disruptions to Middle East supply. US-Iran talks remain deadlocked, and with passage through the Strait of Hormuz and the Bab el-Mandeb Strait restricted, market expectations for when shipping and crude exports will normalize keep getting pushed back. Although US commercial crude inventories rose for two consecutive weeks, easing near-term supply pressure, continued draws on the SPR, falling distillate stocks, and refinery utilization climbing to 97.2% show the physical market remains tight. The three major agencies' August monthly reports also cut their short-term supply-demand outlooks, expecting inventories to keep draining quickly in the second half of 2026; the supply gap and low inventories will keep oil prices highly sensitive to geopolitical events. Looking ahead, although alternative routes are sustaining some exports, capacity, cost, and transit time make it hard for them to fully replace the Strait of Hormuz. As a result, the market's focus has shifted from a purely short-term supply shock to repricing how long the crisis will last. Amid the ongoing US-Iran standoff, the Hormuz crisis is evolving from a "short-term geopolitical risk premium" into a "long-term supply shortage premium," and oil prices will likely stay elevated and volatile in the near term.
