Oil prices surge 20% in July as US-Iran war heightens Strait of Hormuz tensions

Oil fell at the end of a volatile last week but remained on track for the biggest monthly gain since March as the United States-Iran war escalated.

Brent traded below $88 a barrel after swinging in a range of about $11 last week, with the global benchmark up by about a fifth in July. US crude gauge West Texas Intermediate was near $82 a barrel.

While the US and Iran again exchanged strikes last Thursday, shipping through the Strait of Hormuz appears to have picked up in recent days. Meanwhile, Saudi Arabia discussed with representatives of 43 countries forming an alliance to protect navigation in and around the Red Sea, hoping to counter a blockade the Iran-backed Houthi militants imposed on the kingdom last week.


In a televised speech last Thursday, Houthi leader Abdulmalik al-Houthi said there were indications the Saudis were heading toward “comprehensive escalation,” which he said would be met with a fiercer campaign. Apart from strikes on tankers, the group recently claimed attacks on oil facilities.

Note:Children wade in the water with cargo ships at anchor in the background and a fisherman nearby,in the Strait of Hormuz off Bandar Abbas, Iran. AP

Double-digit percentage gains

Energy markets have roared higher in July, with double-digit percentage gains for oil as well as products such as diesel. This month, a fragile pause in hostilities between Washington and Tehran collapsed, the Yemen-based Houthis entered the fray, and Saudi Arabian forces joined the US to strike Iran-backed groups in Iraq. US stockpiles have continued to draw.

After starting the war with Israel in late February to challenge Tehran’s nuclear program, President Donald Trump is once again facing a conundrum of whether to escalate the conflict further in retaliation for Iran’s attacks on US assets, or focus on calming turmoil in global energy markets.

“It’s a real wait-and-see to see if this is going to expand, and if the US is going to retaliate in the way that Trump is threatening or if this is going to be kind of a tit-fortat but on a relatively smaller scale,” said Carolyn Kissane, associate dean at New York University’s Center for Global Affairs.

In addition to the Houthi blockade of Saudi ports in the Red Sea, the US has imposed a full interdiction of vessels calling at Iranian ports, while Tehran continues to menace shipping transiting the Strait of Hormuz, the narrow waterway that links the Persian Gulf to global markets.

Traders were also still assessing rare vessel attacks in the Mediterranean. Earlier this week, fires broke out aboard two liquefied natural gas vessels at an Egyptian port after they were hit by drones. No party claimed responsibility.

Supply snarl worries

Beyond West Asia, traders have also expressed concerns about supply snarls in the Black Sea. Loadings at the terminal vital to Kazakhstan’s crude exports were halted again this week after fresh tanker attacks. Nine vessels have now been attacked at or bound for the Caspian Pipeline Consortium facility this month alone—the most since Russia’s launched its full-scale invasion of Ukraine in 2022.

The International Monetary Fund still sees a risk that the West Asia oil shock could tip the global economy into recession, although the impact would be modest if Hormuz reopens soon, according to Managing Director Kristalina Georgieva.

“Our prediction is that while the war is going on WTI will be in the $80-to- $100 range,” said Jay Hatfield, chief executive officer of Infrastructure Capital Management LLC. “If the war ends, we’ll be kind of $50-to-$60.”

On the corporate front, US supermajors Chevron and ExxonMobil Holdings are due to report earnings later Friday, offering senior executives a platform to address current conditions and the market outlook. On Thursday, rival Shell reported its secondhighest quarterly profit on record, as the conflict in West Asia fuelled a boom in trading as well as refining.