In a market analysis sent to Rigzone on Wednesday, Naeem Aslam, CIO at Zaye Capital Markets, highlighted that Brent crude was trading near $87.81 per barrel, “up approximately 4.4 percent”.
Aslam pointed out in the analysis that oil prices initially declined after U.S. President Donald Trump said the United States and Iran were in “very deep talks”, which Aslam said encouraged expectations that diplomacy could reduce the risk of military disruption and protect regional energy flows. The CIO noted that Brent fell as low as approximately $84.09 per barrel before recovering “sharply”.
In the analysis, Aslam said the rebound followed renewed concerns about attacks on U.S. forces and regional energy infrastructure, alongside President Trump’s warning that failed negotiations could result in “very strong military action”.
“These statements are maintaining a geopolitical risk premium across crude oil, tanker insurance, and refined-product markets,” Aslam stated.
“Any conflict involving Iran, Gulf producers or the Strait of Hormuz could restrict exports, delay shipping and raise freight costs, while progress in negotiations would remove part of that premium and expose oil prices more directly to underlying supply and demand conditions,” he added.
Aslam also noted in the report that yesterday’s U.S. Consumer Confidence Index fell to an actual 90.8 from an upwardly revised 92.2 and missed the 92.3 forecast. The weaker reading creates competing forces for crude, according to Aslam.
“Softer household sentiment may signal slower consumer spending, travel and fuel consumption, but it also reduces the pressure for further monetary tightening,” he said.
Aslam also pointed out in the analysis that U.S. crude inventories “reportedly declined by 3.3 million barrels during the week ending July 24, providing additional physical support as traders assess whether lower stockpiles can offset weaker economic confidence”.
The CIO went on to project that today’s Federal Funds Rate decision, FOMC statement, and press conference will influence oil through the U.S. dollar, financing conditions, and expectations for global demand.
“A more hawkish message could strengthen the dollar and pressure dollar-denominated crude, while dovish guidance could improve risk appetite and support demand expectations,” he said in the analysis.
“OPEC expects global oil consumption to grow by approximately 1.0 million barrels per day in 2026, while the IEA continues to warn that supply growth and uneven demand may limit sustained price increases,” he added.
“The immediate outlook depends on whether Middle East disruption risks and falling inventories outweigh demand uncertainty and the possibility of a stronger U.S. dollar,” he went on to note.
In a market quick take posted on its website, Saxo Bank outlined that crude prices had “reversed hard … after Iran launched ballistic missiles at U.S. forces”.
“That snapped a three-day slide which had been Brent’s worst since April 2020, and Iran’s rejection of the Omani plan to reopen the Strait of Hormuz may, in our view, keep a risk premium in the curve,” the bank added.
In a report sent to Rigzone by the JPM Commodities Research team late Tuesday, analysts at J.P. Morgan said the estimated value of open interest in energy markets had increased by six percent, or $51 billion, week on week, to $873 billion.
“This was driven by a significant increase in prices across the energy complex (Brent/WTI +16 percent, TTF +14 percent week on week) and further supported by strong contract-based inflows of $19 billion week on week,” the analysts added.
“Last week’s escalation in the Middle East conflict propelled Brent prices towards $100 per barrel, while current shipments through the strait are running at just 50 percent of pre-war levels, which includes almost 7.0 million barrels per day of pipeline re-routing – flows that are becoming increasingly vulnerable,” they continued.
To contact the author, email andreas.exarheas@rigzone.com
