Oil returns to the centre of market attention

The oil price outlook has become more sensitive to geopolitical risk, supply flows and demand expectations. Brent and WTI are no longer moving only on standard inventory data or refinery trends; they are also reacting to renewed concern around the Strait of Hormuz, one of the most important energy transit routes in the world.

Recent price action shows how quickly sentiment can shift. Brent crude rose 1.7% to $84.73 per barrel, while WTI advanced 1.5% to $79.34, according to MarketWatch, as traders reacted to renewed US-Iran tensions and concerns over shipping security near Hormuz. The same report noted that Brent’s two-day gain reached 11.5%, highlighting the scale of the recent volatility.

The key question for traders is whether this is a short-term geopolitical premium or the start of a more persistent supply-risk phase. The answer may depend on tanker traffic, Gulf exports, refined product availability, inventories and global demand.

Why Hormuz matters for Brent and WTI

The Strait of Hormuz is critical because a large share of global oil and LNG shipments passes through the route. Reuters reported that the area handles around one-fifth of global oil and LNG flows, which explains why even the perception of disruption can affect Brent and WTI pricing.

Brent is usually more exposed to international supply concerns because it is the global crude benchmark. WTI can also react strongly, but US-specific data such as crude inventories, production levels, refinery utilisation and export flows often play a larger role in its pricing.

The Brent futures curve has already reflected tighter near-term expectations. Reuters reported that the first-month Brent contract traded $8.92 per barrel above the sixth-month contract, the largest premium since June 10. This structure, known as backwardation, often suggests that traders see near-term supply as more constrained than future supply.

Supply data gives the market a mixed signal

The International Energy Agency said global oil supply rebounded by 4.1 million barrels per day to 98.8 million barrels per day in June, supported by a partial recovery in flows through the Strait of Hormuz. However, the IEA also noted that world output remained about 9.4 million barrels per day below pre-war levels, meaning the recovery was meaningful but incomplete.

This matters because a market can look better supplied on paper while still being vulnerable to new shocks. The IEA reported that Gulf oil exports, including volumes bypassing the Strait, surged by 6.5 million barrels per day in June to 16.1 million barrels per day, but that level was still well below the 24 million barrels per day average before the war.

Product markets also remain important. The IEA said refined product cracks and margins surged to four-year highs in early July, even as crude supplies improved, because product markets stayed tight. This creates a more complex picture: crude flows may be recovering, but gasoline, diesel and refining constraints can still support volatility.

EIA forecasts point to possible downside pressure

The US Energy Information Administration presents a more moderate base case. In its July 2026 Short-Term Energy Outlook, released on July 7, the EIA said it expects most crude oil production to return near pre-conflict averages by the end of 2026, with most shut-in production back online in the first quarter of 2027.

The EIA also expects global oil inventories to fall by 2.2 million barrels per day in the third quarter of 2026, far less than the more than 7 million barrels per day draw it projected in June. That shift suggests less pressure on inventories if production and trade flows continue to normalise.

For prices, the EIA forecasts Brent to average $74 per barrel in the third quarter of 2026 and $65 per barrel in 2027, citing higher expected supply and moderating inventory draws. This does not remove the risk of short-term spikes, but it gives the article a clear counterweight to the bullish geopolitical narrative.

Bullish scenario: risk premium stays elevated

A bullish oil scenario could develop if tensions around Hormuz persist, tanker traffic slows again or physical supply disruptions become more visible. In that environment, Brent may remain more sensitive to international supply anxiety, while WTI could follow if US inventories tighten or export demand increases.

The bullish case would be stronger if several signals appear together: falling crude inventories, weaker tanker flows, tight diesel or gasoline markets, stronger refining margins and a weaker US dollar. A weaker dollar can make dollar-priced commodities more accessible for some non-US buyers, although its effect would depend on broader macro conditions.

This scenario would still require caution. A rally driven mainly by headlines can reverse quickly if shipping flows improve or if diplomatic signals reduce the perceived supply risk.

Bearish scenario: flows recover and demand concerns return

A bearish scenario could emerge if Gulf flows continue to recover, production returns faster than expected and inventories start rebuilding. The IEA noted that global observed oil inventories rose in June for the first time in four months, with higher oil-on-water volumes offsetting continued draws in onshore tanks.

Demand is another key variable. The IEA expects global oil demand to decline by 1 million barrels per day in 2026 before rebounding by 2 million barrels per day in 2027. That suggests the demand recovery is underway, but still not strong enough to eliminate downside risks if economic conditions weaken.

If energy prices rise too quickly, traders may also start focusing on inflation, consumer pressure and slower growth. That could limit upside momentum, especially if central banks become more cautious or if risk appetite weakens across equities and emerging markets.

What traders are watching next

The next phase for Brent and WTI may depend on a few high-impact indicators. Weekly EIA inventory data will be important for the US market, while IEA updates can help clarify whether the global balance is moving toward shortage, normalisation or surplus.

Traders are also likely to monitor:

• tanker traffic and security headlines around Hormuz;
• Gulf crude exports and refinery restarts;
• diesel, gasoline and jet fuel cracks;
• the Brent-WTI spread;
• the US dollar and inflation expectations;
• OPEC commentary and production signals.

The most important point is that oil is currently being pulled in two directions. Geopolitical risk supports the upside case, while improving supply and weaker demand assumptions support a more cautious outlook.

Balanced conclusion

The oil price outlook remains open and scenario-dependent. Brent and WTI may stay volatile if Hormuz-related risks continue to affect supply expectations. However, official data from the EIA and IEA also shows why traders should not ignore the possibility of normalising flows, rising inventories and weaker demand pressure.

For now, the market is likely to remain highly sensitive to verified supply data, shipping developments, refined product tightness and macro signals. As new information arrives, the balance between risk premium and demand risk could change quickly.