Crude Oil
Crude Rallies as Renewed Fighting Extends Hormuz Disruptions
Crude prices moved higher this week as renewed military strikes between the US and Iran threatened the recent recovery in tanker traffic through the Strait of Hormuz. US forces struck an island in the strait before Iran retaliated against targets across the region. With shipping through the still strait under threat Washington has adopted a new “tanker-for-tanker” policy aimed at discouraging further Iranian attacks.
The latest fighting has increased the likelihood that shipping disruptions persist through year-end. Analysts view continued Hormuz restrictions through the end of 2026 as a reasonable base-case assumption, with crude flows likely fluctuating between roughly 5–8 MMBbl/d depending on the intensity of Iranian attacks and the effectiveness of US military escorts. Crude traffic recovered toward the upper end of that range in late August, but flows slowed again in early September as attacks intensified.
The longer Hormuz remains restricted, the more important the global inventory cushion becomes. The market has so far absorbed reduced Middle Eastern supply through inventory draws, alternative export routes and escorted tanker traffic. However, continued stockdraws would leave the system with less flexibility to absorb another disruption. US crude inventories posted their first draw since July last week, while broader crude inventories remain under pressure. If shipping conditions deteriorate further while refinery demand remains strong, prices could move materially higher. Conversely, a durable agreement that restores normal tanker traffic would return more Persian Gulf supply to the market and likely pressure prices lower.
AEGIS maintains a neutral view on Bal 26 WTI given the wide range of potential outcomes. A prolonged conflict and shrinking inventory cushion support upside risk, while normalization through Hormuz would quickly loosen the supply picture. We continue to favor upside-friendly structures such as costless collars, while swaps may be more appropriate for producers seeking greater downside protection.
The Cal 27 outlook also remains neutral, although underlying fundamentals appear more bearish, with most forecasts showing significant global oversupply. The key uncertainty is how much of that surplus materializes if Hormuz disruptions extend into 2027. A normalization would reinforce the bearish balance, while prolonged restrictions could materially reduce the expected surplus. Given that range of outcomes, collars remain attractive for establishing downside protection while retaining upside exposure.