Oil Price Supported by Renewed Geopolitical Risk

In a market analysis sent to Rigzone on Monday, Naeem Aslam, CIO at Zaye Capital Markets, noted that Brent and WTI oil prices were being supported by renewed geopolitical risk around the Strait of Hormuz.

“The immediate bullish force is supply-security uncertainty,” Aslam warned in the analysis.

“U.S.-Iran tensions have increased the risk premium attached to Gulf barrels because the Strait remains one of the world’s most important energy corridors,” he added.

“At the same time, President Trump’s Venezuela agreement points in the opposite direction over the longer term,” he continued.

Aslam noted in the analysis that the near-term market is reacting more strongly to “immediate Hormuz risk” than to “future Venezuelan barrels that still require investment, infrastructure, and time before reaching the market”.

He went on to state that the broader supply picture is equally divided.

“OPEC+ has already approved an additional 188,000 barrels per day for September and will reassess market conditions again, adding another potential source of supply if members continue unwinding restrictions,” he warned.

“The IEA, however, still sees a much tighter 2026 physical market, estimating a 4.3 million-barrel per day decline in global supply, a 69 million-barrel fall in inventories during July and a Q3 deficit around 1.8 million barrels per day,” he added.

“At the same time, the IEA expects global oil demand to decline by about 1.6 million barrels per day this year as high fuel prices and disruption damage consumption,” he continued.

Aslam outlined in the analysis that this explains why crude remains volatile rather than moving in one clean direction.

“Geopolitical disruptions and lower inventories support Brent and WTI, while weaker demand, OPEC+ additions, and possible future Venezuelan supply limit how far prices can rise without further escalation,” he pointed out.

Crude Jumps

In a market quick take posted on Saxo Bank’s website on Monday, the bank highlighted that the crude price had jumped, “with Brent trading back above $90, as fresh fighting flared in the Middle East and the U.S. signaled it was likely to unveil new secondary sanctions on Iran”.

“These developments have once again reduced the prospects of bringing the conflict to an end,” Saxo Bank warned in its market quick take.

The bank added, however, that, “with an estimated six to eight million barrels per day of crude flowing” through the Strait of Hormuz, “the upside risk is for now being capped”.

Friday Data

Aslam highlighted in his analysis that Friday’s economic data weakened the demand side of the oil story.

“The Chicago Business Barometer dropped sharply to 47.1 in August from 57.6 in July, falling back below the 50 expansion threshold, while final U.S. consumer sentiment declined to 51.7 from 55.2 in July and 58.2 a year earlier,” he noted.

“Current conditions slipped to 51.9 from 54.8 and consumer expectations fell to 51.5 from 55.4. For oil, these figures are bearish at the margin because softer business activity and weaker household confidence can reduce freight movement, manufacturing demand, and discretionary fuel consumption,” he said.

“China’s latest data adds a similarly mixed signal: Manufacturing PMI improved to 49.8 from 49.2 and beat the 49.7 consensus, but remained below 50; Non-Manufacturing PMI stayed at 49.0 versus a 49.5 consensus, while General PMI edged up to 49.5 from 49.3,” he added.

“China is therefore stabilizing in parts of manufacturing, but it has not yet produced the broad demand rebound that would give oil a strong macroeconomic tailwind,” he continued.

Today’s Data

Aslam projected in Monday’s analysis that today’s economic data will determine whether oil’s geopolitical premium can remain dominant over deteriorating growth signals.

“German Preliminary CPI m/m is important because a hotter Reading would show that energy costs are still passing through into broader inflation, potentially keeping European monetary policy restrictive and eventually weakening industrial and consumer oil demand,” he said.

“A softer inflation reading could improve the growth and financing outlook, but it would also reduce part of oil’s inflation-driven premium. The key decision signal is therefore the balance between physical tightness and demand destruction,” he added.

“If Hormuz tensions remain elevated, inventories stay constrained and Chinese manufacturing pushes back above 50, Brent near $90 and WTI near $85 could remain supported,” he projected.

“If geopolitical risk eases while U.S., Chinese and European activity weaken further and additional OPEC+ or Venezuelan supply emerges, the pressure would shift decisively toward lower oil prices,” he warned.

WTI/Brent Gulf

Aaron Kildow, Crude Commodity Owner at Sparta Commodities, revealed in a commodity note sent to Rigzone today that Sparta expects the gulf between WTI and Brent to widen to minus $9 per barrel on the November and December 2026 contracts within the next two months.

Kildow, who highlighted that this is a level that was last seen in May 2026, outlined that Sparta was anticipating this move “as improved Arabian Gulf flows leave Asian buyers comfortable on supply and strong VLCC and Suezmax freight keep marginal WTI barrels uncompetitive into both Asia and Europe”.

“This refines our 22 August call as we first flagged -$9 per barrel for the November contract when a tight, Hormuz-constrained market had Brent and Dubai outpacing WTI on strength, with arbs expected to reopen into Asia on hard demand pull,” he said.

The level is unchanged and now extends to December. While there is about two million barrels per day of refinery capacity that could come back online in Far East Asia into the end of the year, our more immediate concern is repricing WTI in light of very strong VLCC and Suez freight markets,” he continued.

In the crude market commentary, Kildow noted that Arabian Gulf export flows “came in better than expected in August” and outlined that this, “combined with earlier efforts to secure Atlantic Basin and other alternative barrels, have left Asian crude buyers comfortable with October and early-November coverage rather than anxious about it”.

To contact the author, email andreas.exarheas@rigzone.com