Crude Oil Prices Rise as Middle East Hostilities Persist

October WTI crude oil (CLV26) closed up +0.23 (+0.26%), while October RBOB gasoline (RBV26) rose +0.0377 (+1.25%), marking a 3.5-week high for gasoline. Prices increased due to threats from President Trump to cripple Iran’s economy, which delayed potential resolutions to the US-Iran conflict and Strait of Hormuz reopening.

Trump’s rhetoric pressured markets, with the US Treasury Secretary preparing to outline stricter measures to isolate Iran. However, Iranian President Masoud Pezeshkian urged an end to the war, creating mixed market sentiment.

Escalating hostilities in the Middle East persisted, with Israel targeting Iran-backed Hezbollah in Lebanon and Hamas in Gaza. Drone attacks by Yemen-based Houthis in the Red Sea and strikes in the Strait of Hormuz further disrupted shipping. Despite these challenges, Gulf nations like UAE, Qatar, and Kuwait continued crude exports via “dark” transits, surpassing 9 million bpd through the strait last week.

Geopolitical risks remained high as US-Iran talks stalled. Iran rejected Trump’s claims of controlling the Strait, asserting it requires authorization for safe passage. Meanwhile, OPEC+ approved a September production hike of +188,000 bpd, though implementation could face disruptions from ongoing conflicts.

Bearish factors included a global oil supply deficit worsening per the IEA, exacerbated by war-related demand declines. Conversely, Ukraine’s intensified attacks on Russian oil infrastructure—averaging 30 incidents in July—reduced Russian crude processing to 3.51 million bpd, the lowest in 24 years.

US crude inventories rose 0.3% above seasonal averages, while gasoline and distillate stocks fell sharply. Production briefly reached a record 13.83 million bpd, and active rigs declined slightly to 452, signaling cautious market sentiment.

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