[MARKET ANALYSIS] Crude holds an upward bias, strikes reported in Kuwait and Hormuz
- In geopolitics, President Trump said talks with Iran were ongoing and suggested the Strait of Hormuz could reopen by Tuesday, although US officials clarified that no new negotiations were planned beyond existing mediator-led discussions. Tensions remain high, with reports of Iranian drone attacks on a US base in Kuwait and vessels near the Strait, including a cargo ship struck off Oman. Iran warned that continued efforts to break the blockade could put US forces and vessels at serious risk, while Iranian leaders reportedly believe they can withstand US pressure and raise costs through regional proxies and threats to shipping. Meanwhile, Iran’s foreign minister is expected to visit Islamabad.
- WTI Sept and Brent Oct are firmer amid geopolitics but to varying magnitudes, with the former currently +0.6% intraday and the latter +1.3%. The difference in gains could potentially be a function of President Trump yesterday criticising major oil companies, saying they were making excessive profits and urging them to lower retail fuel prices. The mechanism being: if US refiners are forced to lower fuel prices while crude costs remain elevated, refining margins shrink, prompting them to reduce crude processing to balance books and, in turn, lowering demand for WTI crude. Nonetheless, WTI trades around the middle of a USD 79.62-81.45/bbl range vs yesterday’s USD 78.43-81.30/bbl range. Brent resides within a USD 83.80-85.27/bbl range vs Monday’s 81.55-84.66/bbl range. Dutch TTF is back above EUR 59/MWh, having traded under EUR 58/MWh
- Metals are firmer across the board as DXY remains contained despite the gains across crude, with precious and base metals benefiting from the current stability in oil prices under July highs as President Trump continues to tout diplomacy with Iran, and with no further escalations seen thus far this European morning. Spot gold remains under yesterday’s USD 4,019-4,079/oz range within a current USD 4,043-4,073/oz range. Base metals also benefit across the board, with 3M LME copper back above USD 14k/t in the current 13,871.88- 14,049.30/t range at the time of writing.
Hormuz risk is a recurring template in crude pricing: the strait carries a large share of seaborne oil and LNG, and past episodes of tanker strikes and base attacks have tended to add a geopolitical premium to Brent first, with freight, insurance and prompt spreads moving before any actual supply loss materialises. The established sequence is headline-driven spikes that fade when diplomacy is signalled and flows are uninterrupted, which matches the pattern here of gains stalling under recent highs as Trump touts talks. The reported spread behaviour, Brent outperforming WTI, is the standard signature of a waterborne supply scare, though the note attributes part of the divergence to refiner margin pressure from political rhetoric on fuel prices, a channel that would compress runs and weigh on the domestic grade specifically. The distinction that matters is between harassment of shipping, which historically prices as a temporary risk premium, and a sustained closure attempt, which has never been maintained for long and would draw a direct US naval response. The tells are whether talks produce anything beyond mediator-led contacts, whether vessel incidents continue or stop, and whether the premium shows up in timespreads and tanker rates rather than just flat price. The foreign minister's travel and any clarification from US officials on the reopening timeline are the near-term follow-ons.