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Middle East Risks May Lift Oil Briefly Before Oversupply Returns, Macquarie Says

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Renewed tensions in the Middle East may lift oil prices in the short term, but ample global supply should drive a sharp pullback once geopolitical risks ease, Macquarie said in a note on Wednesday.

Macquarie expects the latest US-Iran tensions to remain temporary as both sides face economic and political limits. The firm said the current rally may reflect short covering rather than a lasting shift in market fundamentals.

Brent moved toward $80 per barrel as renewed US-Iran tensions revived concerns over regional oil supplies, Macquarie said.

Iranian vessel attacks, tighter US sanctions, President Donald Trump's military strikes and threats of further action also raised fresh concerns over shipping through the Strait of Hormuz, the firm said.

The latest escalation also renewed concerns over shipping through the Strait of Hormuz. Insurers advised clients to delay voyages while shipowners reviewed transit risks through the key global oil corridor.

Before the latest conflict, shipping activity had steadily improved. The seven-day average for crude, condensate and clean product flows recovered to about 54% of pre-war levels, narrowing the supply gap to about 8 million b/d.

Floating storage in the Middle East Gulf also dropped from about 150 million barrels to below 10 million barrels as crude loadings accelerated and export activity strengthened across the region, Macquarie said.

The seven-day average for crude, condensate and clean product loadings inside the Strait recovered to about 40% of pre-war levels but still remained roughly 11 million b/d below normal volumes.

Overall Gulf exports recovered to about 65% of pre-war levels, while Gulf crude loadings reached about 68% of their previous rate of roughly 18 million b/d. Inbound vessel capacity averaged about 10 million b/d, according to the note.

Refining margins strengthened as weaker crude prices coincided with tightening fuel supplies. Low product inventories, refinery outages, extreme European heat and seasonal weather risks continued supporting refined fuel markets.

Diesel and gasoil exports recovered more slowly than crude shipments. Middle East Gulf exports remained about 800,000 b/d below pre-war levels, while Russia's export restrictions through the end of July further tightened supplies.

Combined, disruptions in the Middle East Gulf and Russia's export curbs removed about 1.6 million b/d, or roughly 20% of pre-war seaborne gasoil exports, adding support to refining margins, according to the note.

Macquarie remains bullish on crude in the short term, as ICE Brent managed-money short positions sit at the 99th percentile for 2021-2025.

However, the Macquarie expects expanding supplies from Arabian Gulf producers, Iranian exports, Strategic Petroleum Reserve barrels, pipeline reroutes and Chinese re-exported barrels to weigh on prices after geopolitical tensions ease.

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Weekly Crude Prices Rally as Renewed US-Iran Escalation Fuels Strait of Hormuz Supply Risks

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US Central Command launched successive waves of retaliatory airstrikes, hitting about 170 targets aimed at degrading Iran's maritime capabilities.Additionally, the US revoked its general license authorizing certain Iranian oil transactions and allowed a wind-down period through July 17, the Department of the Treasury's Office of Foreign Assets Control said in a statement on Tuesday.Iran responded by striking US military bases in Bahrain, Kuwait, Qatar, and Jordan, while President Trump officially declared the interim ceasefire "over" on Wednesday at the Nato summit.By Thursday, markets found reassurance after Trump downplayed the risk of full-scale conflict and ruled out direct strikes on Iranian energy infrastructure.On Friday, Trump posted on Truth Social that the US had agreed to resume talks with Iran at Tehran's request while reiterating that the ceasefire has ended."The Islamic Republic of Iran has asked us to continue 'talks.' We have agreed to do so, but the United States has stated to them, in no uncertain terms, that the cease fire is over!" Trump posted.Additionally, US officials are reportedly demanding that Iran issue a public statement declaring the Strait of Hormuz open to shipping and affirming that vessels may safely transit the waterway.Officials reportedly said internal struggles in Iran are hindering efforts to strike a deal, multiple media outlets reported on Friday.A failure by Iran to declare the Strait open to shipping will result in consequences, officials reportedly said.Despite the late-week pullback in prices, severe structural risks remain.The prevailing threat level to maritime security in the Strait of Hormuz remains "severe," the Joint Maritime Information Center said on Friday, following recent developments in the Middle East.While crude availability received a temporary reprieve, refined product markets for diesel and gasoline continue to flash tight supply conditions due to refinery strains and Russian fuel disruptions.Ukrainian President Volodymyr Zelenskyy posted on X on Friday that Russia's gasoline crisis is deepening.In a separate post on Friday, Zelenskyy said, "Ukrainian drones reached Siberia and struck the oil refinery in Omsk - nearly 2,500 kilometers from Ukraine. Now, no Russian oil refinery is beyond the reach of Ukrainian weapons."Zelenskyy listed other targeted sites in Russia, including oil facilities in Saratov, Rostov, Tver, Stavropol, Krasnodar, Tatarstan and Bashkortostan regions."Drones were also used against facilities in the Moscow, Leningrad, and Bryansk regions," Zelenskyy posted.On the domestic front, the Energy Information Administration reported that US commercial crude inventories rose by 3 million barrels to 411.4 million barrels, although stocks remain tight at 6% below the five-year average.Despite the renewed geopolitical risks, global energy agencies continue to forecast a gradual rebalance in oil markets.The Energy Information Administration's July Short-Term Energy Outlook, published Tuesday shortly before renewed tensions between the US and Iran, projected that global crude oil production and trade flows would return to near pre-conflict levels by the end of 2026, earlier than forecast in its June outlook.The EIA expects most Middle East crude production and trade flows to recover by year-end, with 1.4 million b/d still shut in during Q4 2026 before most remaining disrupted output returns in Q1 2027.The agency's forecast was based on the June 18 US-Iran memorandum of understanding.The agency estimated that Middle East crude production shut-ins averaged 8.3 million b/d in June, down from 11.2 million b/d in May, reflecting improving supply conditions.The EIA said global oil markets adjusted faster than it expected as weaker demand, particularly in Asia, supply rerouting by Persian Gulf producers, higher exports from North and South America, and strategic stock releases eased supply disruptions.The EIA pegged Brent crude spot prices averaging $85/bbl in June, down $22/bbl from May, and $32/bbl from its April peak. Spot prices dropped below $70/bbl on July 1 as tanker traffic through the Strait of Hormuz accelerated and oil flows recovered, the STEO said."We expect ongoing oil inventory accumulation over the next year will continue to put downward pressure on crude oil prices, with Brent falling to an average of $65/bbl in 2027," according to EIA analysts.The EIA forecasts Brent spot prices will average $74/bbl in Q3, down $27/bbl from last month's outlook. Brent spot prices are estimated to average $70/bbl in Q4 2026, down from $103/bbl in Q2.The full-year Brent spot forecast is now estimated to average $82/bbl, down from $95/bbl in last month's outlook. 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Oil & Energy

US Reportedly Demands Iran Declare Strait of Hormuz Open to Shipping

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