July 20th News
On Friday, July 17, ongoing mutual attacks between the U.S. and Iran have heightened dual risks to global energy supply routes, causing international crude oil prices to surge again by over 4%. Prices have reached their highest levels since mid-June, marking the second consecutive week of substantial weekly gains.
I. Market Trends: Crude oil and refined oil products surged across the board, recording a substantial price increase over the week.
On Friday, at the close of the New York session, NYMEX September WTI crude oil rose by $3.50, representing a price increase of 4.47%, with the settlement price at $81.78 per barrel. Meanwhile, ICE September Brent crude oil climbed by $3.87, marking a price increase of 4.59% and settling at $88.10 per barrel. Both benchmark oils simultaneously reached new highs in over a month. The weekly price increases were even more remarkable: WTI posted a cumulative gain of approximately 14% this week, while Brent crude oil’s weekly price increase reached 17%.
Finished oil prices rose in tandem, fully reflecting the anticipated rise in energy costs: In September, RBOB gasoline increased by 3.25%, settling at $3.1916 per gallon; heating oil saw a slight increase of 0.59% in September, closing at $3.9369 per gallon. The rise in crude oil prices is driving downstream fuel prices to adjust accordingly, heightening supply risks.
II. Trend Analysis: Ongoing U.S.-Iran Confrontation Paralyzes Two Critical Energy Straits Simultaneously
The core driver of the sustained rise in oil prices in this round is the comprehensive escalation of the U.S.-Iran confrontation, with navigation through the Strait of Hormuz being obstructed and the risk of a blockade in the Red Sea's Bab-el-Mandeb Strait, creating a dual supply constraint. The market is concerned about a significant contraction in global crude oil circulation.
(1) The U.S. military is strictly enforcing the maritime blockade, causing a sharp drop in shipping volume through the Strait of Hormuz.
The intensity of the strikes continues to escalate: For the seventh consecutive night, U.S. forces have carried out air strikes against Iranian infrastructure, while simultaneously imposing a stringent maritime blockade across Iran’s entire territory. Within just three days of the blockade’s implementation, U.S. forces have already forced four commercial vessels to reroute, rendered one vessel non-operational, and boarded and inspected numerous transit ships, thereby establishing tight control over shipping in the Persian Gulf. Market analysts point out that retaliatory attacks between the two sides are becoming increasingly commonplace. Should more oil tankers be attacked and damaged, ships will proactively avoid sailing through the Persian Gulf, directly reducing the overall volume of crude oil exports.
Seascape capacity has shrunk dramatically: The Strait of Hormuz carries about 20% of the world’s crude oil supply. Following the collapse of the ceasefire agreement, Iran has designated transit tankers as targets, causing a sharp decline in oil shipments through this vital waterway. Shipping companies, driven by heightened risk aversion, are proactively reducing orders for routes through the Persian Gulf, resulting in a significant short-term drop in crude oil circulation efficiency.
(2) The newly added risk of blockade in the Red Sea route poses a threat to Saudi Arabia’s alternative export routes.
To mitigate risks in the Strait of Hormuz, Saudi Arabia has relied on east-west oil pipelines to redirect more than 70% of its crude oil to the Yanbu Port on the Red Sea for export. Recently, Yanbu Port has been shipping an average of 4 million barrels per day—four times the 973,000 barrels shipped during the same period last year—making it a critical alternative supply channel globally.
However, new risks are now emerging: Iran has urged the Houthi rebels that if U.S. forces strike Iranian power facilities, they will immediately block the Strait of Bab al-Mandeb in the Red Sea. Relevant sources warn that if Red Sea shipping routes are simultaneously restricted and Saudi Arabia’s existing alternative export channels become ineffective, the global crude oil supply gap will further widen. The simultaneous disruption of these two critical shipping lanes could trigger a larger-scale supply crisis.
(3) Fundamental Factors: Insufficient Market Buffer, Institutions Maintain Expectations of High Oil Prices in the Medium to Long Term
The U.S. Strategic Petroleum Reserve has already fallen to its lowest level since 1983, and continued large-scale releases from the reserve can only provide a temporary and limited buffer against market fluctuations. Even U.S. commercial crude oil inventories remain generally tight, lacking sufficient reserves to hedge against sudden supply disruptions in the Middle East. As a result, the supply gaps triggered by geopolitical conflicts can only be addressed by raising prices to adjust demand, thereby amplifying the elasticity of oil price increases.
Barclays’ latest report maintains its price forecasts of $96 per barrel for Brent crude in 2026 and $85 per barrel in 2027. The core logic behind these forecasts rests on two key points: First, the release from strategic petroleum reserves can only provide temporary relief to supply-demand imbalances, and global commercial crude oil inventories do not have substantial spare capacity; second, geopolitical conflicts in the Middle East are likely to persist over the long term, and disruptions to energy transportation routes will continue to embed risk premiums, keeping the oil market in a tight balance throughout the year.
3. Outlook for the Future Market
In the short term, crude oil analysts believe that it is necessary to observe the further evolution of the conflict between the United States and Iran: the intensity and frequency of U.S. air strikes, the scope of Iran's countermeasures, and whether there are large-scale tanker attacks or a comprehensive blockade of shipping lanes. Additionally, it is also important to monitor the transit data of the dual shipping lanes: the number of tankers passing through the Strait of Hormuz and the volume of crude oil loaded at the Yanbu port in the Red Sea, to assess the actual extent of supply reduction. If the conflict further extends and escalates, oil prices are expected to continue to rise.
The medium-term market structure and trend outlook are also not optimistic: Currently, the oil market is in a dual-positive environment characterized by risks from both the Strait of Hormuz and the Red Sea routes, coupled with globally low inventory levels. Geopolitical premiums have become the core factor driving pricing, making it easy for oil prices to rise but difficult to fall. A high-level, wide-range volatile trading pattern will likely persist.
Overall, the simultaneous pressure on the two critical chokepoints for Middle East energy transportation has completely altered expectations for crude oil supply and demand. Before there is a substantive easing of the geopolitical situation, the pattern of high oil prices will be difficult to reverse, and market volatility will continue to increase.
