The Commodities Feed: Oil market shrugs off Persian Gulf escalation
The oil market's muted response to escalating US-Iran tensions suggests a prevailing optimism surrounding supply recovery, despite significant geopolitical risks. Per the full note from ING, oil prices have only seen modest gains lately, with reports highlighting a reduction in speculative long positions. This caution among traders, even as risks peak in strategic waterways like the Strait of Hormuz, underscores a complex balancing act between supply concerns and market sentiment.
What the desk is arguing
The desk asserts that despite recent escalations in US-Iran relations, the oil market is exhibiting an unwarranted sense of complacency. According to ING, although tensions have heightened, with exchanges of strikes and updated threat assessments for maritime trade, market participants appear focused on potential recovery in oil flows instead.
Positioning data indicates a notable retreat in speculator activity, with a net long reduction by 23,790 lots in ICE Brent, bringing the total to a net long of 90,338 lots. This marks the lowest level of speculative positioning since mid-2022, highlighting cautious sentiment despite the looming risks.
Where it sits in our coverage
While our internal coverage lacks specific targets, insights into current positioning and market sentiment indicate a cautious environment. Major firms like jpmorgan have placed a target at 1.10 for March 2026, while bofa stands at a lower target of 1.04 for the same tenor.
There appears to be divergence in positioning, with our desk's perspective leaning towards a more bearish outlook amidst geopolitical tensions, suggesting risks in supply recovery that may not be fully accounted for by the consensus.
How other firms see it
Firms like jpmorgan appear aligned with our desk's cautious stance, emphasizing potential long-term pressures on oil prices due to geopolitical factors. Conversely, bofa holds a contrary view, underscoring confidence in quicker recoveries and reduced risk premiums.
Traders should also monitor the EUR/USD trajectory, which may reflect underlying sentiment shifts, especially as the Fed's monetary policy plays a role in overall dollar strength against commodities.
What the calendar says
With no high-impact events scheduled in the near term, traders should stay attuned to any unexpected developments from the forthcoming talks in Qatar, as any changes in sentiment or policy could rapidly shift market dynamics.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices show limited reaction to heightened US-Iran tensions.
- 02Recent speculative positioning declines hint at increased caution among traders.
- 03Emerging risks in the Strait of Hormuz are being overlooked by the market.
- 04Potential for a rapid recalibration of prices should supply recovery stall.
Market implications
Watch for Brent crude prices to test key support levels around recent positioning lows. An unexpected delay in supply recovery could catalyze significant price volatility, particularly if tensions escalate further in the Gulf region.
Risks to this view
A de-escalation of tensions or a swift resolution to disputes in the Strait of Hormuz could invalidate the current cautious outlook. Additionally, a substantial rebound in speculative positions might signal renewed bullish sentiment, countering the apprehensive stance.
Articles The Commodities Feed: Oil market shrugs off Persian Gulf escalation 02:37 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The oil market has seen only modest gains this morning despite the re-escalation between the US and Iran over the weekend. Even so, we continue to believe the market is too optimistic about the timeline for a recovery in Persian Gulf supplies Warren Patterson and Ewa Manthey Energy – Speculators continue to sell oil Renewed US–Iran tensions failed to materially lift oil prices. The two sides exchanged strikes over the weekend after attacks on vessels transiting the Strait of Hormuz, but have since agreed to pause hostilities ahead of another round of talks in Qatar later this week.
Meanwhile, the Joint Maritime Information Centre raised its threat assessment for vessels navigating the Strait of Hormuz to “substantial”. The oil tanker trade group, Intertanko, told its members to avoid sending tankers through the Strait of Hormuz, if possible. Oman also reportedly told European officials that there’s no going back to a pre-war environment in the Strait of Hormuz – and that vessels transiting the strait may have to pay some fees.
All this demonstrates that there’s still plenty of risk facing the oil market. Even so, participants appear to be shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance. This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow – or if we see significant re-escalation.
While the oil market is technically in oversold territory, momentum appears to still be to the downside. The latest positioning data shows that speculators reduced their net long in ICE Brent by 23,790 lots over the last reporting week, leaving them with a net long of 90,338 lots as of last Tuesday. This is the smallest position that speculators have held since mid-December 2025, when the market was fully focused on the 2026 surplus expectations.
The move over the week was driven by longs liquidating, with them selling 52,097 lots, while there was also a smaller share of short covering. The gasoil crack continues to find good support. Noise around the potential for Russia to temporarily ban diesel exports is building amid a fuel shortage in the country following continued Ukrainian attacks on Russian energy infrastructure.
Russia is a substantial diesel supplier, exporting around 900k b/d. Russia’s deputy prime minister said that any restriction on diesel exports will be short-term. This will still impact the middle distillates market, which has tightened significantly during the Iranian war.
The threat of a ban is likely to keep middle-distillate cracks elevated. Agriculture – Wheat falls on improving crop prospects CBOT wheat prices declined last week, falling by more than 4.5%, amid improving global supply expectations and favourable weather across key US growing regions. The International Grains Council’s upward revision of its 2026/27 global wheat production forecast to 821mt further reinforced the outlook for ample supplies.
US rainfall in parts of the Great Plains alleviated drought concerns and supported crop prospects. Market participants also remained cautious ahead of the USDA’s acreage and quarterly grain stocks report. It's expected to provide additional downside signals for wheat.
While an intense heatwave across parts of Europe is providing some support by threatening yields in a key wheat-producing region, overall crop conditions remain stable. Data from France’s Agriculture Ministry shows that 74% of the soft wheat crop was rated good to excellent as of 22 June. This is down slightly from 76% the previous week but above 68% recorded a year earlier amid dry conditions in Western Europe.
Harvesting has also begun, with 7% of the crop collected as of last Monday, ahead of last year’s pace. Wheat Strait of Hormuz Speculators Persian Gulf Middle distillates Iran conflict Grains Diesel Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Warren Patterson Head of Commodities Strategy Warren Patterson is Head of Commodities strategy based in Singapore. He joined the bank in April 2016 and covers the entire commodities complex. Previously, he worked at a commodities trade house… Ewa Manthey Commodities Strategist Ewa Manthey is a Commodities Strategist based in London.
She joined the bank in September 2022 and covers the entire commodities complex, with a particular focus on the metals markets. She has… In this article Energy – Speculators continue to sell oil Agriculture – Wheat falls on improving crop prospects
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