What I’ve missed – Hormuz hopes clash with new shipping attacks (oil up)
Crude’s inability to break decisively in either direction reflects a market caught between two credible but contradictory signals: mediator optimism on Hormuz and continued kinetic escalation at sea. Traders are fading both the de-escalation headlines and the attack headlines almost as quickly as they land, which points to positioning that is short-term neutral but structurally long, given the EIA’s upgraded price forecasts and record-low SPR levels removing any near-term supply cushion. The dollar’s firmness near the 101 handle on DXY is doing double duty, both reflecting the energy-driven inflation impulse and pricing in a modest lift in September rate hike odds after this week’s hawkish Fed commentary (Goolsbee on Tuesday). Equity markets, by contrast, are reading the same headlines as risk-on, with energy majors’ record profitability offsetting any drag from Middle East uncertainty (except for a sad last hour!). Wednesday’s CPI print is shaping up as the next real inflection point across all four asset classes.
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Every de-escalation headline out of the Gulf is being met by a fresh attack within hours, and oil traders are no longer sure which signal to believe.
Summary:
- Crude has rallied for four straight sessions, WTI near 82 dollars and Brent near 88 dollars, still up close to 30 percent year on year
- EIA has raised its 2026 and 2027 crude price forecasts, citing July’s Middle East production disruptions and ongoing shipping route risk
- Pakistan’s defence minister said the US and Iran are close to “some sort of an arrangement" on reopening the Strait of Hormuz, with Qatar reporting advanced Iran Oman talks on the same
- A cargo ship was struck in the Red Sea’s Bab al Mandeb strait with reported fatalities, and a separate container ship in the Gulf of Oman was reportedly hit by a US helicopter after ignoring blockade warnings
- Trump has hardened his public stance on Iran, adding compensation demands and signalling a willingness to let economic pressure build rather than resume strikes
- Chicago Fed’s Goolsbee said inflation, not the labour market, is the economy’s biggest problem, reinforcing hawkish Fed rhetoric ahead of Wednesday’s CPI release
- US equities sit near fresh highs, but with a soft final hour on Tuesday, with the Dow briefly above 54,000 and energy majors posting a combined 48 billion dollars in second quarter profit
Crude oil extended its rally for a fourth consecutive session, with WTI trading near 82 dollars a barrel and Brent close to 88 dollars, as the market weighs conflicting signals from the Gulf. Prices are up close to 30 percent from a year ago, and the structural case for higher prices firmed further after the EIA raised its crude price forecasts for both 2026 and 2027, pointing to July’s Middle East production disruptions and persistent risk to key shipping routes as justification.
The tug of war playing out in real time centres on the Strait of Hormuz. Pakistan’s defence minister, Khawaja Asif, told Bloomberg that “things are shaping up again in favour of a peace arrangement or a deal," describing the signals from the past two to three days as pointing toward some form of arrangement between Washington and Tehran. Qatar separately said talks between Iran and Oman on reopening the strait to some maritime traffic have reached an advanced stage, and Pakistan’s interior minister met Iranian officials in Tehran this week as part of a renewed mediation push.
That optimism sits awkwardly alongside fresh attacks. A cargo ship was struck in the Red Sea’s Bab al Mandeb strait, with maritime security sources reporting fatalities aboard, extending the conflict’s reach beyond the Strait of Hormuz. A separate incident saw a container ship in the Gulf of Oman reportedly hit by a US military helicopter after its crew ignored warnings from forces enforcing the naval blockade of Iranian ports, a blockade first imposed in April and reinstated in July after the June peace agreement collapsed. Trump, meanwhile, has hardened his public rhetoric, adding demands for compensation from Iran and signalling he may allow economic pressure to intensify rather than resume direct military strikes.
The inflation side of the ledger firmed too. Chicago Fed president Austan Goolsbee said inflation, not labour market weakness, remains the central bank’s most pressing concern, describing the job market as “stable, without being good." His comments land days ahead of Wednesday’s CPI print, which markets are treating as the next major catalyst for both the dollar and rate expectations following July’s 9 to 3 FOMC vote to hold rates at 3.50 to 3.75 percent.
Energy majors have been a standout beneficiary, with Exxon, Chevron, BP, Shell and TotalEnergies posting a combined 48 billion dollars in second quarter profit, their highest cash generation on record. With US Strategic Petroleum Reserve levels now below 300 million barrels, the lowest since 1983, the underlying supply cushion for any renewed shock remains thin, keeping the Hormuz outcome as the single biggest swing factor for markets into the second half of August.
This article was written by Eamonn Sheridan at investinglive.com.