Will oil prices keep rising as Iran tensions threaten global crude supply? This was the question Naeem Aslam, CIO at Zaye Capital Markets, asked in a market analysis sent to Rigzone on Tuesday.
Answering the question, Aslam noted that the wider oil ecosystem remains conflicted because supply risk is colliding with softer global demand expectations.
“International supply estimates point to a meaningful reduction in available crude as Gulf production remains disrupted, while producer-group projections continue to show relatively modest demand growth,” he said in the analysis.
“That is why oil is rising sharply on geopolitical headlines but not moving in a straight line,” he added.
“Any improvement in Hormuz shipping, diplomatic progress or production recovery can quickly remove part of the geopolitical premium, while renewed disruption can push prices higher again,” he continued.
Aslam went on to state in the analysis that, from Zaye Capital Markets’ perspective, “the key issue is whether the physical loss of supply remains large enough to overwhelm weaker consumption trends”.
“If Gulf exports stay restricted, the market can continue supporting Brent above $90; if flows normalize, attention will quickly return to demand growth, inventories and the strength of the global economy,” he said.
Aslam stated that oil can remain supported if Hormuz supply risk persists while economic data stays resilient, but highlighted that a combination of weaker labor data, softer demand, and improving Gulf shipping conditions would make the current geopolitical premium more vulnerable to reversal.
In the analysis, Aslam pointed out that Brent crude was trading around $91.49 per barrel on Tuesday, adding that this was up about 0.7 percent. He also highlighted that Brent rose 2.7 percent on Monday to settle at $90.87 per barrel.
“The immediate driver is not stronger global consumption but a renewed geopolitical supply premium,” Aslam said, commenting on Tuesday’s price rise.
“Progress toward reopening the Strait of Hormuz has stalled, tanker movements remain constrained, and uncertainty around U.S.-Iran relations has increased the probability investors assign to prolonged disruption of Gulf exports,” he added.
“President Trump’s warning that Oman should not interfere with U.S. policy surrounding Iranian shipping, combined with his insistence that Iran cannot obtain a nuclear weapon and his claim of U.S. control over the Strait, is reinforcing the market’s focus on physical supply risk,” he continued.
In a report sent to Rigzone on Tuesday, Bjarne Schieldrop, Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), outlined that Brent crude was trading 0.9 percent higher at $91.7 per barrel, which he pointed out was “the highest level since 31 July”.
Schieldrop projected in the report that Brent was heading towards $100 per barrel again “as it looks now”. He noted, however, that “a pattern we have seen on repeat this year is that whenever the Brent crude oil price hits $100 per barrel or so, it doesn’t take much time before [U.S. President Donald] Trump is out heralding that some good negotiations are ongoing and that there will soon be a new MoU, a ceasefire, and normalized flows of oil out of the SoH [Strait of Hormuz]”.
Oil Price Dominated by Geopolitics
In a research note sent to Rigzone by the HSBC team last week, HSBC analysts, including Kim Fustier, the company’s senior global oil and gas analyst, noted that “more than five months into the Middle East conflict”, oil prices remained “dominated by geopolitics and the day to day reality of transit risk through the Strait of Hormuz”.
“After touching tripled digits in the second half of July, Brent briefly dipped below $80 per barrel on rising prospects of an Iran-Oman agreement, before rebounding to around $90 per barrel as a deal has proved more elusive than hoped,” the HSBC analysts stated.
The analysts outlined in the research note that, in the Strait of Hormuz, traffic remained “volatile” and had “settled around 10 crossings per day, down from 30-40 per day before the re-escalation”.
“Liquids flows have averaged around four million barrels per day, well below public estimates of nine million barrels per day,” the analysts said.
Looking at the Red Sea, the HSBC analysts stated that successful rerouting means little supply has been lost.
“Following Houthi threats around the Bab el‑Mandeb Strait, crossings have halved and flows are being redirected via the Suez/SUMED system in Egypt, increasing freight costs (estimated at $4-5 per barrel to Asia via Egypt and around the Cape of Good Hope),” they said.
“Egypt’s exports have jumped by nearly three million barrels per day versus normal, consistent with a reconfiguration of Saudi West Coast flows. Russia and Kazakh supply losses have in fact been more material, though offset by strong growth in the Americas (U.S., Brazil, Guyana, Canada, Venezuela),” they added.
Looking at demand and balances, the analysts said China remains the biggest swing factor.
“July imports rose slightly from June lows, reflecting the lagged arrival of cargoes bought during the ceasefire; China’s crude inventories remain high at c1.20 billion barrels, only c50 million barrels below the early May peak,” they noted.
“Elsewhere, Asia ex‑China and Europe have returned to pre‑crisis import levels, while U.S. inventories have risen in recent weeks on lower net exports. Tightness is more visible in products than crude,” they added.
The analysts went on to state that global inventories had fallen by more than 400 million barrels since March, “implying an average rate of drawdowns of c2.8 million barrels per day”.
“This is much smaller than initially feared, thanks to pipeline rerouting, some continuation of Gulf flows, significant demand destruction and the pre-conflict surplus from growing non-OPEC supply,” they said.
“At c7.9 billion barrels, global stocks are below year-ago levels but still above 2022-24 levels, suggesting that ‘tank bottoms’ are not imminent,” they concluded.
To contact the author, email
