Price Trend Summary

7/27–8/02: Middle East Situation Remains Uncertain, Pushing Brent Toward Highs Above $85 Later in the Week

Earlier in the week, prices initially pulled back after the US and Iran announced a pause in escalatory strikes, easing market concerns about a broader conflict. Prices then rebounded sharply after the US military announced it had successfully intercepted multiple ballistic missiles fired by Iran's Revolutionary Guard, and as Trump indicated that military action could resume if negotiations fail. Despite positive diplomatic signals, regional risk has not eased: Saudi Arabia intercepted a drone attack originating from the direction of Iraq, and shipping through the Strait of Hormuz has still not returned to pre-war levels — reigniting market concern about a prolonged conflict and driving a sharp price rebound. Mid-week, prices traded in a range. Oman proposed establishing a regional mechanism to manage transit through the Strait of Hormuz, aiming to reduce the risk of escalation through multilateral coordination — but with the US and Iran yet to formally reach a ceasefire agreement, the market remained wary of further military action, keeping prices highly volatile with an embedded risk premium. Separately, Saudi Arabia pushed to form a maritime escort coalition, with more than 40 countries reportedly discussing measures to strengthen security along the Strait of Hormuz and other major shipping lanes, which modestly eased supply-disruption concerns. However, energy-supply risk has not been resolved: a Houthi attack forced Saudi Arabia's Jizan refinery (roughly 400,000 barrels per day) to halt operations, with repairs expected to be completed by mid-August. While Jizan is not a major global crude export hub, the incident shows that Iran-aligned armed groups still retain the capability to strike Middle East energy infrastructure, and damage assessment continued for the Abqaiq crude processing facility. At the same time, the US military carried out airstrikes on a target on Iran's Qeshm Island near the Strait of Hormuz, raising the risk of Iranian retaliation and keeping the market on high alert. Later in the week, prices continued to climb, driven mainly by rising risk around shipping through the Strait of Hormuz. Iran's Revolutionary Guard claimed to have intercepted two tankers passing under US naval escort, and several other vessels rerouted away from the area; the US military said it had helped guide commercial ships around the risk zone. On the same day, the US military launched a fresh round of airstrikes on Iranian targets, while Iran claimed to have carried out a drone attack on Kuwait's Ahmad al-Jaber Air Base — the drone was intercepted, but the incident highlighted a rising risk of the conflict spilling over. In addition, Kazakhstan's Black Sea crude export terminal suspended loading again after a tanker attack, adding further uncertainty to global supply.

8/03–08/09: Sharp Pullback on Negotiation Progress, Then Recovery Above $80 as Actual Shipping Recovery Lags

Earlier in the week, the market began pricing in the possibility that a US–Iran deal would increase Persian Gulf crude supply, driving a rapid pullback in prices (Brent briefly fell below $80). Ahead of the market open, reports also emerged that Trump had announced a pause on new strikes against Iran in favor of reaching a negotiated deal, prompting the market to quickly scale back concerns about a Middle East supply disruption. Qatar also said mediators were making progress in talks to end the US–Iran conflict, and the US side likewise sent positive signals, further reinforcing market expectations for a diplomatic resolution. Mid-week, prices traded in a range as the market began to focus on the time lag between "negotiation success" and "actual supply recovery." Iran and Oman advanced a new plan for managing shipping through the Strait of Hormuz, but Reuters noted the two sides still have significant disagreements over how it would be managed. US crude inventories rose by roughly 2.5 million barrels — contrary to the market's expectation of a draw — with most of the build concentrated at Cushing, weighing on prices in the near term. Still, Middle East supply has not fully recovered: Gulf producer crude and condensate exports in July stood at roughly 10.7 million barrels per day, about 40% below pre-war levels, while the number of vessels attacked in the same period rose from 8 in June to 14, keeping the risk of supply disruption elevated. On 8/6, an Iranian parliamentary committee began reviewing legislation that would consider barring vessels from the US, Israel, and other countries deemed hostile from passing through the Strait of Hormuz, raising market concern that even progress in negotiations may not lead to an immediate full resumption of free passage. Reuters noted that the Iran–Oman shipping arrangement could give Iran greater control over vessels entering the Strait; at the same time, Houthi forces attacked a Saudi tanker, once again turning the Red Sea and the Bab-el-Mandeb Strait into a market risk factor. Saudi Aramco said global inventories have fallen by more than 2.6 billion barrels since February, and the low inventory level has heightened market sensitivity to supply disruptions, giving prices a risk-premium boost late in the period. Later in the week, prices continued to rebound and consolidated at elevated levels, with the core driver still being the fact that the US and Iran have yet to reach a formal breakthrough. While Iran and Oman continued to discuss arrangements for Strait of Hormuz shipping, vessel passage still involves issues such as US- and Israel-linked ships, sanctions, shipping insurance, transit fees, waterway management, and the degree of actual Iranian control over the Strait. The market therefore believes that even if a political agreement is close to completion, the pace of supply recovery could still be slower than expected, keeping prices supported near $80. Goldman Sachs expects Brent to trade in an $80–$90 per barrel range until the US and Iran formally reach an agreement or the conflict escalates further; Citi likewise raised its Q3 2026 Brent forecast from $75 to $80, while maintaining its Q4 forecast of $70 and its 2027 forecast of $65 — reflecting the view that a slower near-term supply recovery will support prices, but that prices still have room to fall once supply increases over the longer term.

US Crude Oil Data Update

Stable End-User Demand, Distillate Demand Beginning to Recover, Continued SPR Drawdown Reflects Ongoing Middle East Supply Pressure

According to the EIA's Weekly Petroleum Status Report released on 7/29 and 8/05, US commercial crude inventories rose from 404.5 million barrels to 407.0 million barrels, shifting from a draw to a build — indicating a near-term increase in crude supply, though the overall supply environment remains disrupted by the Middle East situation. The Strategic Petroleum Reserve (SPR) fell from 307.7 million barrels to 304.8 million barrels, continuing its decline, reflecting that the US is still drawing on the SPR to supplement market supply, and that pressure on crude supply has not been fully relieved. Gasoline inventories fell from 211.3 million barrels to 209.7 million barrels, shifting from flat to a draw, showing that end-user demand remains resilient during the summer driving season. Distillate inventories fell from 110.6 million barrels to 107.2 million barrels, shifting from a build to a notable draw, reflecting a gradual strengthening in diesel and other end-user demand. In addition, the Baker Hughes rig count rose from 451 to 454, a modest increase in drilling activity, while refinery utilization fell from 97.20% to 96.50% — a slight decline, but still at an elevated level. Overall, this week's US crude market showed a pattern of commercial crude inventory builds, continued SPR drawdown, and broad-based draws in refined product inventories. While the build in commercial crude inventories indicates a near-term improvement in supply compared with the prior week, the continued SPR decline reflects that Middle East supply risk is still providing support to the market. Gasoline inventories shifted to a draw, showing that summer driving-season demand remains strong, while distillates shifted from a build to a substantial draw, further reflecting improving end-user demand. On the supply side, the rig count rose modestly, but near-term incremental output remains limited, and with refinery utilization still at elevated levels, refiners appear to be maintaining a high level of operation to meet the Middle East supply shortfall and growing end-user demand. Overall, while the US crude market saw a temporary inventory build this period, strengthening refined-product demand, continued SPR drawdown, and ongoing Middle East geopolitical risk are keeping the supply-demand balance tight. The US–Iran situation and the pace of crude supply recovery warrant continued attention going forward.

Preview of the Three Major Monthly Reports

08/11 (Tue) 05:30 — US EIA Short-Term Energy Outlook, August

July's Short-Term Energy Outlook projected that as Middle East supply recovers and global inventories rebuild, the oil market would gradually shift from tight supply to a supply surplus, returning to oversupply by 2027. However, the recent renewed escalation in the US–Iran conflict and continued Houthi disruption of Red Sea shipping have again raised geopolitical risk. The key focus this month is whether summer driving-season demand will create a new supply-demand gap under relatively constrained supply, and whether continued Middle East conflict and shipping risk will affect the pace of production recovery and crude transportation, potentially causing a longer-term break in the global oil supply chain.

08/12 (Wed) 19:00 — Global OPEC Monthly Report, August

July's OPEC report held that although easing Middle East risk had pulled oil prices down, summer demand and refining activity continued to support market fundamentals. However, renewed Houthi armed action and slow progress toward a US–Iran consensus have raised supply uncertainty. The key focus this month is whether persistent, unpredictable Middle East geopolitical risk will further expand crude supply risk, pushing up prices and weighing on global economic growth — potentially forcing OPEC to revise down its oil demand and economic outlook.

08/12 (Wed) 16:00 — European IEA Oil Market Report, August

July's Oil Market Report described a "two-track" market of loose crude supply alongside a tight refined-products market, and projected that as shipping through the Strait of Hormuz normalizes, supply and demand would gradually return to surplus. However, renewed Houthi activity has again raised Middle East supply and transport risk. The key focus this month, besides whether geopolitical risk is significant enough to overturn the IEA's view of loose crude supply — pushing the market from ample supply toward tightness — is whether the tightness in refined products will widen further. If disruption to Middle East shipping continues to worsen or stalls, delaying the recovery of exports from major oil producers, the IEA may still need to revise down its outlook for a loose global oil market in the second half of the year.

Key News and Current Events

Middle East Situation: US–Iran Talks Reportedly Entering Final Stage, While Houthi Armed Activity Continues to Escalate

On 8/9, Iranian Foreign Minister Araghchi said the agreement between Iran and Oman on transit arrangements for the Strait of Hormuz had entered its final stage, with a new shipping route already planned by both sides. However, Iran stressed that the agreement itself does not mean the Strait would immediately reopen, and that conditions must first be met, including the US lifting the blockade and sanctions, releasing Iranian assets, and providing war reparations. On US–Iran relations, Araghchi denied that the two sides are currently in direct talks, saying information is only being exchanged through intermediaries; Iran is demanding that the US abide by the interim ceasefire reached in June, otherwise formal talks will not resume. Trump said the US side is currently pursuing a "low-key" approach and believes Iran is facing severe inflation (an annualized rate of 77%) and a shortage of funds — suggesting both sides remain in a phase of pressure and probing rather than formal negotiation. As a result, while the near-completion of the Iran–Oman agreement is a positive signal, the conditions Iran has attached are considerable, meaning significant uncertainty remains around a full return to normal commercial shipping through the Strait of Hormuz. In particular, there is a clear gap between Iran's demand that the US take concrete action first and the US position that sanctions should only be lifted after Iran fulfills its commitments. Meanwhile, regional military risk continues to rise. The UAE accused Iran of attacking a vessel belonging to its state oil company; Yemen's Houthi forces claimed a drone attack on Saudi Aramco's Jizan refinery facility, causing a fire (the refinery has a crude processing capacity of roughly 400,000 barrels per day). At the same time, Saudi Arabia, Turkey, and Pakistan signed a defense agreement, signaling that the Middle East conflict has begun to draw in a broader regional security architecture.

Commentary

With Iran facing inflation and funding pressure, and the Trump administration facing pressure from midterm elections, public opinion, and heavy military spending, both the US and Iran are expected to lean more toward negotiation rather than further escalation. Progress has been made on a temporary arrangement, but significant disagreements remain on issues such as transit fees, waterway management, and the actual degree of Iranian control over the Strait. Overall, while conflict risk has eased compared with the prior period, achieving full consensus and a complete reopening of the Strait of Hormuz will still take time; combined with continued escalation in Houthi activity, oil prices are likely to retain a degree of geopolitical risk premium in the near term.

Conclusion

Near-Term Crude Oil Market Summary

Overall, the crude oil market continues to show a pattern of relatively stable demand constrained by supply-side pressure from the Middle East situation. On the demand side, the summer driving season continues to support gasoline consumption, with gasoline and distillate inventories both drawing down, indicating that end-user demand remains resilient; global oil demand is expected to remain stable with modest growth, with no clear signs of demand weakness in the near term. On the supply side, while US commercial crude inventories have built modestly — reflecting some recovery in supply — the continued SPR drawdown and the fact that shipping through the Strait of Hormuz has not yet fully recovered mean that, based on current estimates, even as US–Iran talks continue to progress, the pace of supply recovery could still lag market expectations. Combined with continued Houthi attacks on Middle East energy facilities and shipping, global crude supply remains under geopolitical pressure, providing a degree of near-term price support. Oil prices are expected to remain range-bound at elevated levels.