In a market analysis sent to Rigzone on Thursday, Naeem Aslam, CIO at Zaye Capital Markets, noted that Brent and WTI oil prices were “easing as traders remove part of the geopolitical premium that had built around Middle East supply risk”.
“The key catalyst is the possibility of a phased reopening of the Strait of Hormuz, alongside President Trump’s statement that U.S. forces have cleared mines from the main shipping lane,” Aslam said in the analysis.
“That reduces the immediate probability of a major physical supply shock and helps explain why prices are pulling back even though the region remains tense,” he added.
“At Zaye Capital Markets, we see this as a market repricing risk rather than a sudden collapse in demand,” he continued.
“President Trump’s broader comments that prices are ‘coming down very rapidly’ despite the Iran conflict also reinforce the idea that energy-market fears may be easing, but crude remains highly sensitive to any renewed disruption involving Iran, shipping routes or regional military escalation,” he stated.
Aslam went on to note in the analysis that the physical oil market “still argues against treating this decline as a completely bearish shift”. He pointed out that U.S. commercial crude inventories increased only 95,000 barrels last week, while the Strategic Petroleum Reserve fell by another 3.7 million barrels to 289.7 million barrels, “leaving the emergency stockpile historically low”.
He also highlighted that OPEC has reduced its 2026 global oil demand growth expectation to roughly 580,000 barrels per day and pointed out that the IEA “sees a more difficult balance, with global demand expected to fall 1.6 million barrels per day but supply projected to decline by 4.3 million barrels per day”.
“The IEA also estimates that July inventories fell by 69 million barrels and that the Q3 market deficit could reach around 1.8 million barrels per day,” he said.
“Those numbers explain why crude can fall on diplomatic optimism while still remaining structurally supported by thin inventories and constrained supply,” he added.
Aslam outlined in the analysis that, if Hormuz shipping normalizes faster than expected, prices could fall further. He warned, however, that if talks fail or disruption returns, the lack of a large supply cushion could send Brent and WTI sharply higher again.
Second Layer
The Zaye Capital Markets representative also noted in his analysis that yesterday’s U.S. economic data added a second layer to the oil price outlook.
“Q2 GDP remained at 1.5 percent annualized, personal consumption was revised higher to 3.4 percent, durable-goods orders rose 1.1 percent month-over-month, while ex-transportation orders increased only 0.4 percent,” he said.
“Personal income rose 0.4 percent and personal spending increased 0.2 percent. Headline PCE inflation advanced 0.2 percent month-over-month and remained at 3.7 percent year-over-year, while core PCE increased 0.2 percent monthly and held at 3.3 percent annually,” he added.
Aslam stated that, for oil, these figures are mixed but still important.
“Stronger consumption and positive income growth suggest U.S. fuel demand is not facing an immediate collapse, while softer underlying manufacturing orders show that industrial momentum is less powerful than the headline data suggests,” he noted.
“At the same time, inflation remaining above three percent keeps interest rates and the U.S. dollar relatively restrictive, which can limit upside in dollar-priced crude even when the physical market is tight,” he added.
Next Short Term Oil Move
Aslam went on to project in the analysis that today’s U.S. unemployment claims “could decide which force dominates the next short-term oil move”.
“Expectations are around 208,000 compared with 206,000 previously,” he said.
“If claims come in materially above forecast, traders may interpret that as weaker labor-market momentum and a possible warning for household spending, transportation demand, and broader fuel consumption, which could pressure crude initially,” he added.
Aslam pointed out, however, that weaker employment data could also lower Treasury yields and the U.S. dollar, “partially offsetting that bearish demand signal”.
“If claims come in below forecast, stronger labor resilience would support the economic-demand case for oil, although it could also keep monetary policy restrictive and the dollar firmer,” he said.
“At Zaye Capital Markets, the main oil market question is therefore whether easing geopolitical risk can outrun still-tight physical balances,” he added.
“If diplomacy improves and shipping flows recover, Brent and WTI could continue losing risk premium; if inventories tighten further or Middle East tensions re-escalate, current price weakness could reverse quickly because the global supply buffer remains limited,” he concluded.
Price Drop
In a market quick take posted on its website on Thursday, Saxo Bank highlighted that oil prices were down around eight percent from Monday’s peak “amid renewed Middle East supply optimism”.
Arthur R. Hogan, Chief Market Strategist at B. Riley Wealth, told Rigzone on Wednesday that oil prices were “all about the perception of a potential … Iran-Oman deal to secure a safe transit route through the Strait of Hormuz”.
“There is some reporting out of Pakistan … [of] meaningful progress in talks aimed at de-escalation and restoring navigation through the Strait of Hormuz,” he pointed out.
“On top of that, the shift by the U.S. to sanctions, versus using just military force, reduced the perceived risk to Gulf supply, even though the U.S. did not rule out other interventions,” he added.
Phil Flynn, Senior Market Analyst at the PRICE Futures Group, outlined to Rigzone yesterday that the oil market will see some downward pressure if it appears that financial strain on Iran will be too much for the country.
“There’s a growing expectation that the tide is trying towards the United states and the reports that more oil is getting through the Strait of Hormuz, with the big uptick in exports, is easing the concerns of any shortages of oil supply in the near term,” he added.
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