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- WTI opens with a big bearish gap on Monday amid renewed hopes for US-Iran diplomacy.
- Shipping restrictions through the Bab el-Mandeb Strait and the Strait of Hormuz limit losses.
- The mixed fundamental backdrop warrants caution before placing aggressive bearish bets.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – opens with a bearish gap at the start of a new at the start of a new week and retreats further from its highest level since June 8, around the $92.25 zone, touched last Thursday. The black liquid, however, recovers slightly from a four-day trough, touched during the Asian session, and currently trades near the $84.00 mark, still down nearly 6% for the day.
The US paused its bombing campaign following 13 consecutive nights of strikes on Iranian targets late on Friday, prompting Tehran to suspend its retaliatory attacks against Washington’s allies in the Middle East. US ambassador to the United Nations (UN) Mike Waltz said that while forces remained locked and loaded, President Donald Trump wants to give negotiations a little bit of room. This revives hopes for a diplomatic resolution to end a five-month-old US-Iran conflict, leading to some unwinding of the geopolitical risk premium and exerting pressure on crude oil prices.
Meanwhile, traffic through Bab el-Mandeb fell on 26 July after Iran-backed Houthis in Yemen attacked Saudi oil installations along the coast of the Red Sea. This adds to concerns about significant disruptions to global oil supplies due to the restricted transit through the Strait of Hormuz, which holds back traders from placing aggressive bearish bets and limits the downside for crude oil prices. Investors might also opt to wait for further developments surrounding the Middle East crisis before confirming that the commodity has topped out and positioning for deeper losses.
Analysts at Rabobank’s RaboResearch Global Economics & Markets team highlight that crude benchmarks have surged on renewed supply concerns, noting that “Brent, WTI, and refined products rallied sharply as Hormuz disruptions, intensified Russia-Ukraine strikes, CPC terminal outages, and record-tight diesel markets renewed fears of a broader supply crunch.” They frame these overlapping disruptions as reigniting worries over the durability of global oil supply, with the combination of geopolitical flashpoints and logistical bottlenecks driving the latest leg higher in the complex.
