Oil markets experienced significant volatility over the past week, driven by escalating geopolitical tensions and supply disruptions. According to Rabobank, renewed tensions between the United States and Iran, intensified strikes between Ukraine and Russia, and disruptions at the CPC terminal have sharply lifted crude and refining margins. Brent crude surged from $83 per barrel on July 13 to $88 per barrel, briefly topping $90 overnight—the highest level since mid-June—before paring gains. West Texas Intermediate (WTI) rose from $78 to $82 per barrel, a rise of approximately 5% over the same period [1].
The rally was fueled by shipping disruptions in the Strait of Hormuz, ongoing military strikes, and concerns over a broader supply crunch as global stockpiles remain at record lows. Diesel markets are particularly tight, with the ICE gasoil crack spread widening to $65 per barrel and hitting a record high for three consecutive days last week. The U.S. 3-2-1 crack spread also reached a record high of $70 per barrel. These record spreads reflect a dual supply shock: Ukrainian drone strikes have sharply curtailed Russian diesel exports, while Hormuz disruptions have choked Middle Eastern flows. In response, India raised its diesel export levy to 15.5 rupees per liter and its jet fuel export levy to 14.5 rupees per liter to retain domestic supply, while U.S. retail gasoline prices climbed back above $4 per gallon [1].
On Monday, WTI traded around $81.30, down 0.54% on the day as investors took profits following the recent sharp rally. Despite this modest pullback, underlying support for crude prices remains due to persistent Middle East tensions and concerns over potential disruptions to global oil supplies. The conflict between the U.S. and Iran is cited as the main driver of market sentiment, with the U.S. continuing military strikes against Iranian targets and Tehran maintaining a hardline stance over the Strait of Hormuz. Any prolonged disruption to traffic through this strategic waterway could significantly tighten global oil supply [2].
However, there are also signs of ongoing diplomatic efforts. Iranian Foreign Ministry spokesperson Esmaeil Baghaei stated that Tehran pursues both military and diplomatic approaches based on national interests, and confirmed that intermediaries have exchanged messages with Iranian officials in recent days to reduce tensions. This suggests that backchannel diplomacy remains active despite ongoing hostilities [2].
Analysts at ING highlight that the oil market remains highly vulnerable to further supply shocks, noting continued disruptions to tanker traffic through the Strait of Hormuz and the expected end of releases from the U.S. Strategic Petroleum Reserve, which could leave the market more exposed to supply risks. ING also observed that speculative investors significantly increased their net long positions in ICE Brent last week, reflecting persistent bullish sentiment despite elevated market volatility [2].
CONCLUSION
Oil prices have surged to multi-week highs amid escalating geopolitical tensions and supply disruptions, with both Brent and WTI experiencing sharp rallies. While diplomatic efforts are underway to ease U.S.-Iran tensions, the market remains highly sensitive to further supply shocks and disruptions, keeping bullish sentiment elevated. The situation continues to drive volatility and upward pressure on crude and refined product prices.