Brent crude oil price surged past $91 per barrel on July 20, reaching its highest level since June 11, as renewed fighting between the United States and Iran intensified concerns over global energy supplies and the critical Strait of Hormuz shipping corridor.
The spike marked the ninth consecutive day of US airstrikes on Iranian military targets, with Tehran responding with attacks on US military installations across the Gulf region, including in Kuwait, Bahrain, and Jordan. According to Oil & Gas Middle East, the latest escalation raised fears of sustained disruption through one of the world’s most important energy corridors.
Brent futures rose as much as 3.8% Monday morning to briefly cross $91 per barrel before pulling back to around $88, according to Yahoo Finance Canada. US benchmark West Texas Intermediate crude rose roughly 3% to cross $84 before falling to roughly $81 a barrel.
Supply Concerns and Strait of Hormuz Disruptions
The Strait of Hormuz carries around a fifth of the world’s seaborne oil, making any threat to traffic through the waterway a major concern for energy markets. According to Oil & Gas Middle East, crude prices have surged over the past week as Washington and Tehran traded fire, raising fears of sustained disruption.
However, US Energy Secretary Chris Wright said oil flows from the Arabian Gulf region had continued despite the ongoing exchanges. Wright told ABC News that nearly 14 million barrels of oil per day were moving from the Arabian Gulf region, with about seven million passing through the Strait of Hormuz and the rest flowing through bypass pipelines, according to Oil & Gas Middle East. He claimed that “oil and gas and other products can flow through the Strait of Hormuz, with or without Iranian cooperation.”
The conflicting signals have left investors assessing whether the recent rise in crude prices represents a short-term geopolitical risk premium or the start of a more sustained disruption to energy markets, per Oil & Gas Middle East. Stephen Innes of SPI Asset Management told Al-Monitor that markets were being forced to trade two competing narratives at once, with cooling underlying US inflation and a softer labour market suggesting the energy shock may not necessarily trigger a new cycle of broad-based inflation.
Broader Economic Impacts
The pressure on refined products has been even greater than crude, squeezing international markets for gasoline, diesel, and jet fuel. Roughly 2.1 million barrels per day of the 3 million barrels per day of refinery capacity remain offline, according to Yahoo Finance Canada. In the US, gasoline prices at the pump crossed $4 per gallon again on Monday, reapplying pressure to the American domestic economy.
The 3-2-1 crack spread, a commonly cited benchmark for the refining market, reached an all-time high above $70 per barrel on Friday, per Bloomberg data cited in Yahoo Finance Canada. JPMorgan head of global commodities Natasha Kaneva said the dynamics help explain the market’s message: “Distillate cracks in both the US and Europe have surged toward record highs — an indication that the shock is increasingly becoming a refining story rather than simply a crude supply story.”
Prices pulled off their highs overnight after Iran said mediators from countries including Pakistan and Qatar contacted leaders in Tehran, signaling potential diplomatic progress, according to Yahoo Finance Canada. An Iranian foreign ministry spokesman said the “diplomatic apparatus has been active in recent days, and ideas from some mediators have been conveyed to the Islamic Republic of Iran.”
Sources
- Oil & Gas Middle East — Brent crude rise to $91, Strait of Hormuz supply concerns, US Energy Secretary Wright statements on oil flows, analyst commentary from Stephen Innes
- Yahoo Finance Canada — Brent and WTI crude price movements on July 20, ninth day of US strikes, refined product pressures, gasoline prices crossing $4 per gallon, refinery capacity offline, crack spread data, Iranian diplomatic signals
