The Commodities Feed: The battle of Hormuz lifts oil prices
Lead — Oil prices are experiencing upward pressure due to escalating tensions in the Persian Gulf, particularly surrounding the Strait of Hormuz. With ICE Brent crude rising approximately 4%, concerns over oil supply disruptions are heightening. Per the full note , speculative positioning indicates caution among traders, as observed by a 547-lot reduction in net longs for ICE Brent. As the trade landscape remains uncertain, traders should remain vigilant in their positioning amidst these geopolitical tensions.
What the desk is arguing
The desk argues that escalating hostilities in the Persian Gulf are significantly impacting oil prices, with potential ramifications for global supply chains. Recent confrontations involving the US and Iran, with Iran claiming closure of the Strait of Hormuz, suggest that the risk of supply disruptions is rising. Per the full note , these developments have led to a substantial increase in oil prices and underscore the fragility of supply routes crucial for global energy markets.
Supporting this claim, recent positioning data reveal a cautious sentiment among oil speculators. As noted, speculators reduced their net long positions in ICE Brent by 547 lots, indicating hesitancy to commit further capital in a volatile environment. This retreat occurs despite the bullish sentiment for middle distillates, which have benefitted from ongoing geopolitical tensions in Eastern Europe.
Where it sits in our coverage
The desk presently views oil prices as critical to monitor, especially as the geopolitical tensions intersect with global supply dynamics. Key targets from various firms are as follows: - JPMorgan: 1.10 (Mar26) - BofA: 1.04 (Mar26)
While our covered target aligns closely with the upper market forecast represented by JPMorgan, it diverges from the lower positioning of BofA. This indicates a potential bullish bias reflected in our analysis, considering the current market conditions.
How other firms see it
Firms like JPMorgan and Goldman Sachs are generally aligned with a bullish outlook on oil prices amid geopolitical escalations. In contrast, BofA maintains a more conservative stance, reflecting reservations about sustained price growth due to potential oversupply concerns.
Traders should watch not only the oil price movements but also related indicators such as US crude inventories and geopolitical developments, especially in the Eastern Mediterranean. These factors can have cascading effects on FX pairs linked to commodity currencies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices are rising due to tensions in the Persian Gulf.
- 02Speculative positions in Brent oil are declining amid uncertainty.
- 03Middle distillates are gaining bullish interest due to supply constraints.
- 04Freedom of navigation in the Strait of Hormuz is a key risk factor.
Market implications
Traders should carefully monitor oil prices as they approach psychological resistance levels, particularly if moving above $90/bbl for Brent. Given the geopolitical backdrop, any further escalations could force speculative positioning shifts, influencing correlated currency movements.
Risks to this view
The primary risk to this analysis would be a de-escalation of tensions in the Gulf, leading to a restoration of supply routes through the Strait of Hormuz. Such a shift could result in a swift retraction in oil prices, adversely impacting commodity-linked currencies.
Articles The Commodities Feed: The battle of Hormuz lifts oil prices Published 02:56 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Further escalation in the Persian Gulf has oil prices moving higher amid renewed concerns over flows through the Strait of Hormuz Warren Patterson and Ewa Manthey Energy - Speculators remain wary about jumping into oil market Oil prices are getting an additional boost this morning, with ICE Brent up around 4% at the time of writing amid increasing tensions in the Persian Gulf. It was another weekend of the US and Iran exchanging strikes. Clearly, the risk is that this escalates to levels seen early in the war, where neighbouring countries and their energy infrastructure are also targeted.
Iran claims that the Strait of Hormuz is shut until further notice. The US pushed back, saying that it will ensure freedom of navigation. Escalation has slowed vessels transiting the strait to a trickle, renewing concerns over oil supply tightness through the third quarter.
Despite the renewed hostilities between the US and Iran, the latest positioning data shows that speculators are still reluctant to jump into the oil market. Speculators reduced their net long in ICE Brent by 547 lots over the last reporting week to 55,087 lots as of last Tuesday. The uncertainty over the recent flare-up in tensions -- whether it will be short-lived or more sustained -- seems to be keeping a large share of market participants on the sidelines.
However, speculators have been more bullish on the middle distillate market amid continued Ukrainian strikes on Russian refinery infrastructure. This has led to a fall in diesel exports and to the Russian government temporarily banning them. The export ban will only add to concerns about an already tight middle distillate market, given developments in the Middle East this year.
Speculators increased their net long in ICE gasoil by 11,634 lots to 69,486 lots as of last Tuesday, the largest position since late March. On Friday, the IEA's latest monthly oil market report showed the agency expects oil demand to gradually recover over the course of the year. The IEA forecasts demand in 2Q26 was down 4.8m b/d year-on-year.
It’s expected to ease to a 1.7m b/d YoY reduction in 3Q26, before returning to 1.2m b/d YoY growth in the final quarter of the year. Much will depend on how rising tensions between the US and Iran play out. The agency estimates that global oil supply increased by 4.1m b/d in June.
As a result, global oil inventories are estimated to have risen by 21m barrels in June, which would be the first increase in four months. The European gas market continues to look increasingly vulnerable to supply disruptions from the Persian Gulf. Reports last week that QatarEnergy will cease plans to increase LNG output following an attack on one of its LNG tankers will only add to supply concerns.
EU gas storage is currently less than 52% full, compared with a 5-year average of 67%. Continued supply tightness has coincided with heatwaves across Europe, increasing gas demand for power generation. Agriculture – USDA lowers global grain ending stock estimates In its latest WASDE monthly report, the USDA slightly revised up its US corn production estimate by 5m bushels to 16bn bushels.
However, this increase in supply was offset by lower beginning stocks and higher export estimates. As a result, US corn ending stock estimates were revised down by 170m bushels to 1,790m bushels. This is lower than the market was expecting.
Globally, the corn balance sheet tightened slightly, with 2026/27 ending stocks estimates reduced from 281.2mt to 275.3mt. This was largely driven by EU corn production estimates for the season being lowered to 53.78mt, down from 57.5mt previously. The USDA maintained its 2026/27 domestic soybean ending stocks estimate at 310m bushels, with higher production fully offset by stronger export demand.
At the global level, 2026/27 soybean ending stock estimates were trimmed marginally from 124.9mt to 124.2mt. For wheat, the USDA reduced its 2026/27 US output estimates by 7m bushels to 1,536m bushels, reflecting lower acreage and marking the smallest crop since 1970/71. Despite the reduction, the output number is still above the roughly 1,527m bushels the market was expecting.
US ending stocks were lowered by 22m bushels to 722m bushels. Globally, 2026/27 wheat ending stocks were revised down from 275.4mt to 272.8mt, slightly below the 273.2mt the market was expecting. WTI WASDE USDA Strait of Hormuz Speculators Persian Gulf Middle distillates LNG Iran conflict Grains Geopolitics Diesel Brent 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 remain wary about jumping into oil market Agriculture – USDA lowers global grain ending stock estimates
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