The collapse of the US-Iran ceasefire has revived energy inflation concerns, lifting oil prices and US Treasury yields, Kpler said in a Thursday note.
The US-Iran memorandum of understanding signed on June 17 is no longer valid, US President Donald Trump said on July 8, after renewed US strikes near the Strait of Hormuz, Iranian attacks on Bahrain and Kuwait, and fresh sanctions targeting Iranian crude exports.
Despite those developments, oil prices had been easing before the latest escalation. Front-month Brent crude dropped from the mid-$90s in early June to around $71 per barrel by July 6, shedding about $25/bbl in under a month, Kpler said.
Traffic through the Strait of Hormuz also recovered. Crude and condensate shipments averaged 5.7 million barrels per day in June, up from 1.8 million b/d during March to May, before climbing to 8.9 million b/d in the first week of July, according to the report.
At the same time, subdued Chinese buying continued to cap prices. Seaborne crude imports stayed below 7 million b/d, far below the long-term average of 10.4 million b/d, Kpler said.
Trump's announcement reversed market sentiment. Front-month Brent briefly moved above $80/bbl before settling near $79, leaving the contract more than 8% higher over two trading sessions. The December 2026 Brent contract also exceeded $78/bbl for the first time since June 22.
Diesel led gains among refined products as prices tracked the rise in crude. Front-month US heating oil climbed to an intraday high of $3.77 per gallon before easing to $3.67, still up more than 12% over two days.
US gasoline futures added 3.7%, while Russia's diesel export ban provided additional support, Kpler said.
Treasury yields climbed alongside rising energy prices. The benchmark 10-year US Treasury yield rose to nearly 4.6% on July 8, its highest level since May, while the two-year yield reached 4.24%, matching the upper end of its 12-month range, Kpler said.
Investors have also shifted expectations for US monetary policy. CME Fed Funds futures now price in an 85% likelihood of at least one Federal Reserve rate increase before year-end and a 47% probability of two hikes, while expectations for rate cuts have largely disappeared, Kpler said.
Kpler's base case remains one Federal Reserve rate hike this year, with the possibility of another during the first half of next year. Even so, the firm does not expect the US central bank to enter a sustained tightening cycle.