Crude Oil Surges Over 9% as U.S.-Iran Conflict Intensifies Around Strait of Hormuz

August WTI crude (CLQ26) settled Monday up $6.73, or 9.42%, while August RBOB gasoline (RBQ26) climbed $0.1817, a 6.09% gain. Both benchmarks hit multi-week highs—crude at a 3.5-week peak and gasoline at a five-week high—as escalating hostilities between the United States and Iran roiled markets.

Prices accelerated after President Trump announced the reinstatement of a blockade on Iranian vessels transiting the Strait of Hormuz, declaring the waterway would remain open “with or without Iran” and that the U.S. would act as its “guardian,” seeking reimbursement of 20% of all cargo shipped for providing protection. The move follows weekend U.S. missile strikes targeting Iranian air-defense systems, coastal radar sites, and missile and drone capabilities. Iran retaliated with missile and drone attacks on targets in Jordan, Bahrain, Kuwait, and Qatar, and struck two vessels attempting to transit the strait. The renewed blockade risks prompting further Iranian attacks on commercial shipping.

Additional support came from intensifying Ukrainian drone strikes on Russian energy infrastructure. Russian crude output fell to 8.928 million bpd in June, a 2.5-year low per OPEC data, while EA Analytics reported processing rates averaging 3.91 million bpd in early July, a 21-year low. Bloomberg counts more than 50 Ukrainian attacks on Russian fuel facilities this year, hitting at least 24 of the country’s 34 largest refineries. The damage has triggered widespread fuel rationing and a near-total ban on gasoline, jet fuel, and diesel exports. Russia is the world’s second-largest diesel exporter after the U.S., according to Vortexa.

Countervailing supply pressures limited gains. Bloomberg data show Russia’s four-week average crude exports rose to 4.13 million bpd through June 28, the highest since the 2022 invasion, likely reflecting displaced volumes from damaged refineries. Meanwhile, the International Energy Agency reported the United Arab Emirates pumped a record 4.1 million bpd in June. The IEA also warned on June 17 that the Iran conflict will cut global oil demand by 1.1 million bpd this year, double its prior estimate.

On the demand side, the U.S. Department of Energy raised its 2026 domestic production forecast to 13.78 million bpd from 13.72 million bpd. OPEC+ plans to continue unwinding 2023 supply cuts, targeting full restoration by September. The group added 188,000 bpd in August, though Middle East producers face challenges restarting output curtailed by regional conflict. OPEC’s June output rose 2.34 million bpd to 18.75 million bpd.

Floating storage declined sharply, with Vortexa reporting crude on stationary tankers down 32% week-over-week to 82.85 million barrels as of July 10. EIA data for the week ended July 3 showed U.S. crude inventories 6.6% below the five-year seasonal average, gasoline 6.9% below, and distillates 13.4% below. Domestic production edged up 0.4% to 13.860 million bpd, just shy of the November 2025 record. Baker Hughes counted 445 active U.S. oil rigs in the week ended July 10, unchanged from a 13-month high but well below the December 2022 peak of 627.

Source link