Here's a look at what happened in oil markets in the week of July 13-17 and what the focus will be in the days to come.
OVERVIEW: Oil prices are on track for weekly gains of more than 13% as the conflict between the U.S. and Iran intensifies across the Gulf, while energy and refined fuel flows through the Strait of Hormuz continue to slow. Brent crude, the global oil benchmark, is trading above $86 a barrel, while West Texas Intermediate Futures are around $80 a barrel.
MACRO: Escalating hostilities between Washington and Tehran are raising concerns that higher energy prices could keep inflation elevated and increase the likelihood of Federal Reserve rate hikes. While producer prices declined last month due to lower energy costs, June's inflation data doesn't yet capture the impact of the recent escalation in U.S.-Iran tensions or the resulting surge in oil prices.
GEOPOLITICAL RISKS: Geopolitical risks remain the dominant driver of oil prices as tensions in the Middle East continue to escalate. The U.S. has struck multiple bridges in Iran to disrupt supply routes to a strategic port and naval base on the Strait of Hormuz, after reimposing a naval blockade on ships entering and leaving Iranian ports. These developments raise the risk of prolonged disruptions to energy shipments through one of the world's most important oil chokepoints. At the same time, Houthi attacks on Saudi Arabia suggest the conflict could broaden beyond the Strait of Hormuz to the Red Sea, threatening traffic through the Bab el-Mandeb Strait. Traders are closely monitoring whether the latest flare-up in tensions marks the beginning of a broader, full-scale conflict in the region.
SUPPLY AND DEMAND: The renewed disruption has halted the recent recovery in regional energy supplies, reigniting concerns over tighter global markets. Refined fuel markets have been hit hard, with diesel and gasoline prices jumping.
"Recent events have significantly increased the risk of a more severe scenario in which oil flows remain constrained for an extended period," said Kieran Tompkins, senior climate and commodities economist at Capital Economics.
Attention is also turning to the Bab el-Mandeb Strait, the southern gateway to the Red Sea, amid concerns it could become a target for Yemen's Houthi rebels. According to Commerzbank, oil shipments through the waterway increased from just under 3.9 million barrels a day in February to around 7.2 million barrels a day in April, underscoring its growing strategic importance. After traffic briefly normalized when flows through the Strait of Hormuz resumed at the end of June, volumes through Bab el-Mandeb surged again following the renewed disruption in Hormuz. A blockade would tighten global supply further and push oil prices even higher.
Meanwhile, OPEC further lowered its global oil-demand growth forecast for this year. It now expects global oil demand to grow by 780,000 barrels a day, down from 970,000 barrels a day previously. The cartel's projections remain far more optimistic than those of other forecasters, which expect the conflict to weigh more heavily on fuel consumption. The International Energy Agency expects demand to decline by 1 million barrels a day this year, while the U.S. Energy Information Administration projects a contraction of 1.2 million barrels a day.
WHAT'S AHEAD: The Iran war will remain the key driver for commodity markets, with investors closely monitoring shipping traffic through Hormuz, movements in refined fuel prices, and the risk of further disruptions. Particular attention will also be on the Bab el-Mandeb Strait, where any escalation involving Houthi rebels could threaten Red Sea shipping, tighten global energy supplies, and add further upward pressure to oil and refined product prices.
Next week's U.S. economic calendar is exceptionally light, with the flash PMI surveys serving as the main data release and the key indicator for assessing business activity and economic momentum.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
July 17, 2026 10:59 ET (14:59 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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