| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 93.15 | 2.28 | 83.54 | 92.03 | 82.89 |
| US WTI ($/b) | 85.45 | 0.95 | 79.05 | 88.16 | 77.86 |
| ICE Gasoil ($/MT) | 1,282.50 | 3.25 | 1,122.23 | 1,143.99 | 977.95 |
| Jet CIF NWE ($/MT) | 1,298.26 | -12.90 | 1,152.46 | 1,228.44 | 1,068.58 |
Brent came close to breaking through 95 \$/b last week, reaching its highest level since mid-July. While the 60-day Memorandum of Understanding expired without being extended, the return to outright hostilities that many feared has not materialised. Despite that, the market has continued to move higher as traders become increasingly concerned that disruption around the Strait of Hormuz could be prolonged and that the risk of escalation remains significant.
The main catalyst for the latest rally was the missile attack on the UAE alongside President Trump's announcement of a new economic isolation plan targeting Iran. From the market's perspective this is concerning, even the most optimistic interpretation points to a continuation of disruption around the Strait of Hormuz. The more pessimistic scenario is that Iran follows through on repeated warnings that it would retaliate against its Gulf neighbours if additional pressure were imposed, raising concerns that energy infrastructure could become a target and sustain long term damage. The one remaining source of optimism continues to be the ongoing discussions between Iran and Oman regarding future shipping arrangements through the Strait of Hormuz. Progress in those talks could potentially create a pathway towards renewed diplomatic engagement between Iran and the United States. Iran will likely be weighing how far it can push the confrontation given the approaching US mid term elections, where Trump will be keen to demonstrate progress in resolving a conflict that has proved increasingly unpopular domestically. That said, attempts to analyse the situation through a purely pragmatic lens have so far been poor predictors of actual events. What may appear to be the rational course of action for either side has repeatedly been overtaken by political and strategic considerations. For Iran, the primary objective remains regime survival. By standing up to the United States, the government can reinforce the perception domestically that it remains strong enough to resist external pressure and internal challenges alike. Having already survived a sustained military campaign, the next question for markets is whether it can withstand a prolonged economic confrontation in much the same way.
An additional concern for oil markets is the growing strain on regional export routes. Saudi Arabia continues to avoid transit through the Bab el Mandeb Strait due to the threat posed by Houthi attacks. As a result, crude is increasingly being moved north through the Red Sea before passing through the Suez Canal and pipeline infrastructure linking the Red Sea to the Mediterranean. This route has become critically important for Saudi exports seeking to avoid the Strait of Hormuz. While it provides an alternative outlet, it is also considerably more complex, expensive and vulnerable than traditional shipping routes. The situation highlights just how stretched regional energy logistics have become and underlines the broader fragility of supply chains across the Middle East.
Looking ahead, the market remains firmly hostage to geopolitical developments. The most obvious upside risk is a return to open conflict between the United States and Iran. Under that scenario it would not be difficult to envisage Brent moving through 100 \$/b as fears over supply disruption intensify. However, even if the current uneasy status quo persists, it is not necessarily a benign outcome for energy markets. Supplies remain under pressure, shipping routes are constrained, and inventories continue to be drawn upon to offset disruption. At the same time, it remains unclear how much genuine progress is being made in the negotiations between Oman and Iran. The lack of transparency around those discussions continues to leave the market trading on headlines rather than hard facts. If meaningful progress can be achieved on shipping arrangements through the Strait of Hormuz, some of the current geopolitical premium could begin to unwind. Until then, the balance of risk appears skewed to the upside, particularly if further attacks occur or diplomatic efforts begin to stall. With Brent already approaching 95 \$/b, the next major move is likely to depend on whether the coming weeks bring de-escalation and compromise, or another step towards a broader regional confrontation.
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