Oil prices settled with gains on Monday after a session of back-and-forth trading, marking the fourth consecutive day of volatile, directionless movement in the market.
The geopolitical risk premium remains elevated, and according to foreign media reports, supply is tightening further as Chinese buyers increase their purchasing volumes. Crude grades including Oman and EOSP have seen notable strength, while INE crude continues to outperform Western benchmarks amid rising overall costs.
The geopolitical developments of recent days have left investors bewildered. The situation is chaotic and inherently destabilizing—Iran striking a US carrier, US forces attacking Iranian tankers, Iran retaliating against vessels from other nations. Such actions damage the reputation of major powers and represent a disaster for the oil market.
Strait of Hormuz shipping flows have plummeted to their lowest levels since May, with the ten-day daily average of transiting vessels at just 10 ships, putting significant strain on the crude transportation supply chain.
Meanwhile, the situation in Yemen carries escalation risks, and multiple oil facilities in Saudi Arabia and Russia have come under attack once again, keeping supply concerns firmly in focus.
The elevated, volatile trading pattern of the past several sessions reflects the market's uncertainty over geopolitical risks. The risk premium remains substantial, and tight supply conditions are a certainty until the Strait reopens. This lends resilience to oil prices, yet investors remain cautious about chasing highs, indicating the market has not shown clear signs of a trend reversal. The tug-of-war between bulls and bears at these elevated levels continues, calling for prudent risk management and measured participation.
Daily Market Data
WTI crude futures were closed early due to the US holiday, settling up $1.22, or 1.33%, at $92.70 per barrel. Brent crude futures rose $0.72, or 0.75%, to settle at $97.00 per barrel. INE crude futures gained 1.73% to 700.4 yuan.
The US dollar index fell 0.24% to 98.92. USD/CNH on the Hong Kong Exchange rose 0.02% to 6.7062. The US 10-year Treasury yield declined 0.13% to 107.36, while the Dow Jones Industrial Average slipped 0.51% to 53,414.25.
Key Developments
US-Iran maritime clashes have escalated anew, with Hormuz shipping shrinking dramatically. Iran has officially announced plans to designate a restricted zone in the Strait of Hormuz, warning that vessels entering without authorization will face sanctions. Over the weekend, the US and Iran exchanged fresh maritime attacks—US forces struck three Iranian tankers, while Iran retaliated against US vessels and those violating shipping rules.
Traffic through the Strait of Hormuz has dropped to its lowest since May, with the ten-day daily average at just 10 ships, squeezing the crude supply chain. Geopolitical conflict has pushed Brent and WTI prices higher in tandem, amplifying market concerns over Middle East energy supply disruptions.
Iran has also announced fuel price hikes for high-volume consumers to offset the economic strain of prolonged sanctions and wartime conditions. Qatar, meanwhile, has stated that Gulf national security cannot rely entirely on the US-led alliance system and that independent security capabilities must be developed. Ukraine reported overnight strikes on oil processing facilities in Russia's Perm region and Tatarstan, resuming attacks after a US special envoy's weekend visit to Moscow.
Ukrainian President Zelensky confirmed long-range capabilities were used against refineries in Perm and Tatarstan, without providing further details. Ukraine's sustained campaign of intensive strikes against Russian refineries aims to weaken its capacity to process crude and supply domestic fuel. The attacks have caused a sharp drop in Russian gasoline output, forcing the government to impose temporary export bans on most gasoline and diesel. Perm hosts a 260,000 barrel-per-day refinery, located approximately 1,500 kilometers east of Moscow and owned by Russia's largest private oil producer Lukoil. Tatarstan is home to multiple refining and petrochemical facilities, including Taneco (300,000 bpd, operated by Tatneft) and the independent TAIF-NK refinery (145,000 bpd).
Qatar's LNG vessels are heading back toward the Gulf, signaling a potential return to exports. Multiple Qatari LNG carriers are sailing back toward the Strait, suggesting the country may be repositioning vessels to resume exports through Hormuz. Ship tracking data shows six Qatar-affiliated empty LNG carriers currently in the Gulf of Oman or en route. Kpler data indicates another empty vessel has recently transited the Strait and is now in the Gulf heading toward Qatar.
Qatar once supplied about one-fifth of global LNG and has nearly halted exports since a tanker was attacked in late July—contrasting sharply with oil exports, which have rebounded notably over the past month. The vessel movements suggest Qatar may be adopting a more assertive strategy despite renewed US-Iran conflict and Tehran's planned restricted zone outside the Strait. QatarEnergy has not responded to requests for comment.
Hormuz gridlock has sidelined OPEC+, with price control shifting to the Middle East battlefield. OPEC and its allies maintained their October crude production quotas unchanged at Sunday's meeting. Delegates indicated the group needs to first reach consensus on new production baselines before determining next steps on output policy. The meeting included seven core members—Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman.
The Iran conflict continues to disrupt oil exports through the Strait of Hormuz, severely limiting OPEC+'s actual influence over prices and market share. Although the group agreed in August to raise September output as part of phasing out its 1.65 million bpd cut agreement, actual production remains well below target due to the war. Rystad Energy analysts noted that OPEC+ can adjust output targets on paper, but there is no guarantee those barrels will actually reach the market.
OPEC+ retains a separate layer of production cuts covering most member countries, which extends through the end of 2026. The group must assess each member's production capacity to establish 2027 baselines before deciding how to phase out reductions. Sources indicate this discussion is likely to occur in the fourth quarter, during which OPEC+ may pause further increases. Sunday's statement made no mention of post-October policy arrangements.
In recent years, only the seven participating members (including the UAE, before its exit from OPEC in May) have been involved in monthly output decisions. These seven nations will hold their next meeting on October 4.
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