Brent crude traded near $76 a barrel and West Texas Intermediate remained under $72 a barrel following a volatile week of geopolitical developments. As reported by CNBC TV18, technical talks between the US and Iran are continuing, with a US official confirming that Washington remains committed to finding a solution despite the escalating tensions. The status of an earlier truce remained unclear after President Donald Trump said the deal was over, though both sides have stopped short of returning to all-out war. Iran retaliated against US installations in Bahrain and Kuwait, with Tehran branding both the licence revocation and strikes a breach of the MOU, while its foreign minister warned that final peace talks hinge on US restraint. However, Trump's comments raised hopes of a possible diplomatic breakthrough after a fresh flare-up in fighting, with Qatar and Pakistan also trying to bring the US and Iran back into negotiations, according to media reports. The latest developments show the US official cast Iran's attacks on vessels in the strait as acts of terrorism and Iran's actions as failing to meet the memorandum of understanding's performance-based conditions, as reported by Business Standard.
Vessel traffic in Hormuz appeared to have ground to a near halt as of Thursday, with traders monitoring closely if movements will resume. According to CNBC TV18, US Central Command stated that "Iran does not control the Strait of Hormuz," adding that American forces helped more than 800 vessels transit the waterway since May. The conduit links Gulf producers to global markets, and its standing has been one of the major sticking points in the US-Iran war, with Tehran seeking to exercise greater control over traffic. The heightened tensions slowed transit through the strait, with the waterway back at the centre of the oil market's focus. Iran's Revolutionary Guard struck three commercial vessels transiting the strait, including a Qatari-flagged LNG carrier near Oman's coast and a Saudi-flagged supertanker, prompting US forces to hit targets in the Islamic Republic over two days this week. Despite the disruptions, the trickle of tankers that made it out in recent weeks means a backlog of vessels that had been stuck inside the Persian Gulf has now been largely cleared.
The market outlook for the second half of the year depends largely on China's buying strategy and inventory build-up. According to Ruehl's analysis, crude could briefly fall below $60 a barrel if China waits for lower prices before returning to the market. He noted that vessel traffic through the Strait of Hormuz is steadily recovering after recent disruptions, helping ease concerns over global oil supplies. As reported by CNBC TV18, Ruehl stated that "as long as the trend is one of more ships and not one of disruption, it's good news for consumers of oil because it's good news in terms of bringing prices down." Kotak Securities analysis confirms this trend, with Banerjee noting that "on a good month about 2,000 tankers used to transit. Now it is still, I would say on a very good day, you are able to do half of that." The resumption of shipping through Hormuz, a critical chokepoint for almost 20% of global energy supply, has been a key driver of the recent price decline. Traders are now watching whether vessel movements through Hormuz resume, along with production and sales from Persian Gulf oil producers, with Saudi Arabia, the world's top crude exporter, also due to release its monthly allocations to customers shortly.
On the supply side, Ruehl highlighted that the latest production increases by OPEC+ members, along with rising output from countries including the UAE, Russia, Iraq and Iran, point to an increasingly well-supplied market. According to Kotak Securities, OPEC+ faces internal divisions over production quotas with Iraq and Kazakhstan's persistent overproduction while allowing an August output increase. Despite official cuts of around 6 million bpd, the market still had an estimated 2-3 million bpd surplus pre-war, with currently 5-6 million bpd remaining offline. The latest OPEC+ decision to increase output by 188,000 barrels per day for next month, driven mainly by Saudi Arabia and Russia, has further heightened oversupply concerns. Market experts have stated that signs of increasing overall crude oil supply could push oil prices below pre-Middle East war levels. While Ruehl does not see a cap on oil prices if fresh geopolitical disruptions emerge, he believes downside risks currently dominate the market outlook.
The demand side presents a more complex picture as five months of elevated prices have done real and lasting damage to demand, particularly in Asia. As reported by Business Standard, the EIA now expects global oil consumption to fall by 1.1 million barrels per day in 2026, a swing of 2.3 million barrels per day from what it was forecasting in February. China has dramatically cut its Gulf crude purchases, drawing down stockpiles and switching to Russian and other alternative barrels, with this shift in buying habits unlikely to reverse quickly even as Hormuz reopens. The diplomatic architecture that enabled temporary normalization remains fragile, with core disputes over Hormuz sovereignty, proposed transit fees for passage, and the release of frozen assets not resolved in the MOU. The collapse of the Bürgenstock negotiations in late June briefly lifted oil prices, demonstrating how precarious the truce has been and how quickly market attention can pivot back to geopolitical risk. Talks have also failed to make significant progress on issues such as tolls on shipping traffic through Hormuz, the status of frozen Iranian assets and Tehran's nuclear ambitions, as reported by Business Standard.
