Oil Prices Rebound as Hormuz Risk Premium Rises

The price of oil has experienced a significant increase in recent weeks due to traders repricing their risk assessment for Hormuz. September WTI crude oil futures are trading at $81.19, up $4.11 or 5.33% for the week.

This rise can be attributed to the collapse of optimism surrounding last week's deal talks between Iran and the United States. The market had initially priced in a potential agreement that would have reopened the Strait of Hormuz, but this did not materialize.

The Hormuz premium has been rebuilt as traders reassess their views on supply and demand. While there was no new supply loss, the lack of a deal between Iran and the US led to an increase in risk premium. The rally pushed WTI above $84 earlier in the week and Brent briefly moved above $90.

The market's view of the situation has shifted, with traders now focusing on the physical shipping picture. Despite increased tanker traffic, the Strait of Hormuz remains a central issue, with over 125 vessels a day moving through the waterway before the conflict.