Oil prices climbed sharply during the overnight session, with a sudden rally triggering just after 1 a.m. Tuesday. The move was sparked by news that Iran had seized a UAE-flagged tanker in the Strait of Hormuz, combined with US crude reserves falling to their lowest level since 1982, ultimately driving prices up more than 3%. SC crude continued to outperform the international market, gaining roughly $5 per barrel more than global benchmarks over the past week, underscoring how supply reductions are intensifying anxiety on the consumption side.
The intraday trading session had previously been marked by complex and volatile back-and-forth swings in response to various headlines, reflecting investors' hesitation about the near-term direction of prices. Yet it is increasingly clear that oil is prone to upward moves rather than declines. The market has grown anxious over the sustained blockade, and any sign of geopolitical tension is now providing fresh upward momentum.
The 60-day deadline under the US-Iran memorandum of understanding signed in June officially expired on Monday. At one point, prices briefly dipped following reports that an extension agreement had been approved, but the market quickly realized the claim was not officially confirmed. Later, US President Trump stated that Washington was not currently seeking to extend the agreement with Iran. Trump continued to take a "no rush" stance on the Iranian issue, while Tehran maintained its hardline posture, pressuring the US by saying its policy had shifted from defensive to "fully offensive." Iran indicated it would convey relevant messages to the US and regional nations through mediators, and would not wait indefinitely for the US to continue its maritime blockade. Iran has set a multi-week deadline for Washington to fully implement the memorandum, and should diplomatic efforts fail, all Iranian entities are prepared to escalate tensions in and around the Strait of Hormuz.
It is evident that Tehran is applying maximum pressure on Washington, and the geopolitical landscape still carries a risk of further loss of control, with capital remaining cautious while attempting to price in the risk. Judging from the current rhetoric between the two sides, a fundamental resolution to the Hormuz standoff appears unlikely. Both the US President and the Energy Secretary have repeatedly emphasized that millions of barrels of oil pass through the Strait each week. Iranian officials, meanwhile, have made clear their control over the strait. The seizure of the UAE tanker appears more like a declaration, demanding that all vessels use routes designated by Tehran. The blockade has led to a notable decline in trackable tanker transits, though Gulf states have been quietly shipping crude out of the strait through covert means. Saudi Arabia has also begun offering Asian buyers oil supplies loaded from near the Omani coast, making the actual volume passing through the strait difficult to quantify precisely, with real flows likely higher than publicly known figures.
The performance of oil prices objectively reflects the tight supply conditions facing the market amid the ongoing blockade, keeping prices firm. In this context, any geopolitical development that heightens tension is likely to push prices higher, and Monday night's rally was a clear reflection of the market's deepening unease. At the same time, however, actual transit flows through the strait under the blockade may be stronger than expected, which could mean the real supply shortfall is less severe than feared. Brent has returned above $90 for the first time since August, and refined product prices in the US and Europe continue to climb. The Trump administration has little tolerance for high oil prices, and as prices advance, policy measures to cool the market could emerge at any time — this remains a key source of uncertainty. While maintaining a cautiously bullish stance, risk management remains essential, and participation should be approached with prudence.
Daily Updates: WTI crude futures settled up $1.34, or 1.63%, at $83.74 per barrel. Brent crude futures rose $2.35, or 2.65%, to $90.87 per barrel. INE crude futures gained 4.91% to close at 596.5 yuan. The US dollar index slipped 0.06% to 99.58, while the Hong Kong dollar-yuan rate fell 0.07% to 6.7251. The US 10-year Treasury note dropped 0.13% to 108.45, and the Dow Jones Industrial Average declined 0.51% to 53,459.78.
Recent Headlines: US-Iran Peace Talks Stalled, Hormuz Shipping Slowdown Supports Oil Prices
International oil prices edged higher on Monday, with Brent crude briefly gaining 0.88% to $89.37 per barrel and WTI rising 0.68% to $83.04, as fading prospects for a lasting US-Iran peace deal continued to attract buyers. Both benchmarks had climbed over 5% in the prior week following attacks on tankers and refineries. Iran's foreign minister said Saturday that no decision had been made on resuming negotiations with the US, while President Trump urged Americans to accept modestly higher gasoline prices as the conflict persists.
Iran's armed forces commander, Major General Amir Hatami, issued a stern warning on Sunday, vowing to firmly prevent the US from re-entering the Persian Gulf, the Sea of Oman, and the Strait of Hormuz, and opposing any re-establishment of US military bases in the Middle East. He stressed that pushing US forces out of the region "has become a reality" and that US forces are "no longer permitted" to operate in those waters. Shipping data shows transits through the Strait of Hormuz slowed notably over the weekend following the tanker attacks. Only five cargo vessels passed on Saturday, and none on Sunday, compared with 31 the previous weekend. The UAE accused Iran of attacking a third vessel operated by Abu Dhabi National Oil Company on Friday, following two earlier attacks on Thursday night. Analysts note that unless there is clear evidence of a substantive disruption in crude supply, the upside for oil prices may remain limited.
US-Iran 60-Day Agreement Expires Without Effect, Hormuz Standoff Intensifies
The 60-day term of the US-Iran memorandum signed in June formally lapsed on Monday, yet the agreement had already become hollow in practice, with neither side showing willingness to renew it and the diplomatic impasse deepening. In the final phase, both parties traded accusations of failing to honor commitments — Washington charged Tehran with not reopening the strait, while Tehran claimed Washington maintained its blockade and failed to deliver sanctions relief. The strait carries roughly one-fifth of global oil and LNG shipments. Iran's foreign minister said over the weekend that Tehran had not decided whether to resume talks, while Washington warned of continued pressure and asserted its intention to control the strait. Iran's deputy foreign minister also emphasized that the strait's opening and closing is directed solely by Tehran, leaving the two sides sharply opposed.
With the agreement expired, market focus has shifted from whether it would be extended to what new framework might follow. Qatar, Pakistan, and Oman continue to relay messages between the two sides, and Iran and Oman are discussing the possibility of temporary arrangements for Hormuz shipping. Iran's supreme leader criticized the US signature as lacking credibility, while Washington is expected to expand sanctions and maintain a naval presence. In the short term, the restricted status of the strait is unlikely to be lifted, and close attention should be paid to the evolution of core disputes including nuclear issues, asset freezes, and military presence.
Multiple Tankers Disable Transponders for Covert Hormuz Transits, Actual Oil Flows May Exceed Expectations
According to media reports, oil exporters including the UAE, Qatar, and Kuwait have been shipping fossil fuels through the Strait of Hormuz covertly, with multiple tankers disabling their transponders for months to conceal their movements. Due to the hidden nature of these operations, the actual volume of oil passing through the strait is difficult to tally precisely, though Bloomberg notes that real flows may exceed the market's current estimate of around 4 million barrels per day. This covert shipping approach carries significant security risks. Reports indicate that since the conflict began, 23 vessels belonging to Abu Dhabi National Oil Company alone have been attacked, resulting in one death and 20 injuries.
Analysts believe that beyond secret shipments, increased pipeline flows and the drawdown of national strategic petroleum reserves have also helped cushion the global economy from the impact of the Middle East conflict. US Energy Secretary Wright said in early August that approximately 8 to 9 million barrels per day were moving through the Strait of Hormuz. However, satellite data cited in reports shows that only about 26 vessels per day transited the strait in July, a fivefold drop from pre-conflict levels. The discrepancy between these figures highlights how reduced shipping transparency is complicating statistical accuracy.
Saudi Arabia Offers Crude Loaded Off Oman Coast, Signaling Possible Shift in Transshipment Strategy
Saudi Arabia is now offering oil supplies loaded from near the Omani coast, indicating the kingdom may be following the UAE's lead in transshipping more crude around the Strait of Hormuz. According to sources familiar with the matter, Saudi Aramco is offering crude cargoes loaded via ship-to-ship transfers at locations such as Sohar in the Gulf of Oman. The cargoes consist of Arab Medium and Arab Heavy crude, suggesting the oil almost certainly originates from the Persian Gulf. Saudi Aramco CEO Nasser said in March that the Yanbu pipeline primarily carries Arab Light and Arab Extra Light crude, noting at the time that the kingdom's offshore fields, mainly located in the Gulf, account for its medium and heavy oil supply. Saudi Aramco declined to comment on the matter.
China's 15th Five-Year Oil and Gas Plan Emphasizes Market Reforms and Peak Oil Consumption
The National Development and Reform Commission and the National Energy Administration have issued the "15th Five-Year Plan for Oil and Natural Gas Development." The plan calls for diversifying upstream gas supply entities, promoting consolidation and standardized operations among city gas enterprises, and implementing the gas price pass-through mechanism between upstream and downstream. It also aims to regulate supplier behavior, strengthen the fundamental role of gas contracts, improve storage and peak-shaving market mechanisms, and enhance gas supply security for residential use. The plan includes research on refining the fuel tax system and refining the refined oil pricing mechanism, along with regular reviews of cross-provincial natural gas pipeline transportation tariffs. For the first time, the plan formally incorporates peaking oil consumption as a development task. Departing from previous approaches to oil consumption management, this plan coordinates national energy security with dual-carbon goals, balancing supply stability with low-carbon transition, and promotes the shift of oil from a single fuel source to an important industrial raw material. It systematically advances carbon reduction in production and reasonable consumption control at the demand end. Regarding refining and petrochemical transformation, the plan upholds "capacity replacement with reductions" for refining capacity, strictly controls new capacity, and continues to promote "oil-to-chemicals," "oil-to-specialty," and "oil-to-materials" transitions, pushing the refining industry toward more intensive, refined, and green development.
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