Overview
- Over the weekend the United States paused air strikes and Iran signalled a halt in retaliation, prompting a drop in the geopolitical risk premium that traders had built into oil prices.
- Brent fell to the mid‑$80s and WTI to the low $80s as markets priced reduced short‑term military risk while staying sensitive to how talks progress.
- Shipments through the Strait of Hormuz and Bab el‑Mandeb remain sharply lower, with Barclays estimating flows through Hormuz fell to about 2.9 million barrels per day from roughly 5.9 million in the prior week, maintaining a material supply choke point.
- Buyers have already reshaped sourcing: China’s July imports likely rose to about 7.8 million barrels per day and Indian refiners sharply increased Russian crude purchases, producing wide swings between discounts and premiums for Russian cargoes.
- Signs of demand loss and rising inventories have cooled prices for now, but continued chokepoint disruption would force more rerouting, raise shipping and security costs for refiners, and could quickly rekindle volatility if hostilities resume.