Oil Prices Rise as the United States and Iran Escalate the Middle East Conflict
The peace accord between the United States and Iran which was remotely signed on June 17th, 2026, has now completely collapsed with both protagonists increasing hostilities, and the Strait of Hormuz is once again closed to all traffic. The US has also blockaded Iranian oil exports, having a negative effect on oil prices with the benchmark brent crude now trading at $84.20 – $85.20p/bl (per barrel), an increase of circa 18% – 20%, and WTI (West Texan Intermediate) trading at circa $80.34p/bl, an increase of circa 13% – 15%.
Iranian officials have subsequently announced that “Regional energy exports are either shared by all or denied by all”. Furthermore, experts in this arena have observed that the IRGC (Islamic Revolutionary Guards Corps) may well employ their Houthi partners/allies located in Yemen to close the Bab el-Mandeb gateway* to the Red Sea, putting that energy artery at risk as well as the currently shut Strait of Hormuz. The US military may well find themselves to be soon fighting on two fronts.
*Bab el-Mandeb gateway – Often translated from Arabic as the “Gate of Tears” or the “Gate of Grief”, possibly an apt description considering the current state of affairs in the Middle East. It is located between the Horn of Africa and the Arabian Peninsula, and is one of the world’s most critical maritime chokepoints. Historically, the gateway has handled circa 10% – 12% of all global trade and acts as a primary artery for energy transportation between Asia, the Middle East and Europe. Analysts advise that millions of barrels of petroleum products transit the gateway daily and its closure will have a direct effect on the global economy.
Analysts have noted that once the peace was signed, exports from the Persian Gulf recovered to just over 80% of pre-conflict levels, (Iranian crude exports were estimated in the region of 1.5 million – 2 million bpd – barrels per day), but last week, it had declined to under 50% or approx 11 million bpd. Furthermore, analysts noted that if the Strait of Hormuz remains closed, benchmark brent crude could be above the $110pbl come Q4 this year, and could be even higher if Houthi’s are successful in disrupting shipping in the Bab el-Mandeb gateway.
Experts suggest that once again, global inflation will be negatively impacted leading to further rises in the cost of living including fuels at the pumps, foodstuffs and airline prices. Indeed, once the Strait of Hormuz reopened data shows that oil prices plunged leading to an easing of inflation in such countries as the United States, China, Germany, France, Italy and Brazil. What happens next is dependent on the two protagonists, but it seems that neither side is prepared to budge with Iran not prepared to give up their nuclear programme including their uranium enrichment— which is a key component of nuclear weapons.
Experts suggest that there is no way Iran will allow a free passage through the Strait of Hormuz and will accordingly charge tariffs. Iran currently holds the upper-hand in the Strait, and some independent military experts are saying that short of the United States conducting an all-out war with Iran, this stalemate will continue until President Trump declares victory. Experts note that even if he secures a victory, it is likely to be pyrrhic—a win achieved at such a high cost that it ultimately feels like a defeat. Analysts argue that regardless of how events unfold between now and November, the fallout will likely cost him the mid-term elections, with some news outlets already labeling the conflict ‘Trump’s Vietnam’.
