Oil Prices Rise on US-Iran Conflict, but Rally Fails to Match Initial War Surge
Oil prices are rising again due to renewed conflict between the US and Iran, but the rally is weaker than initially expected. The price of Brent crude rose by about 43% in the first three weeks after the war began on February 28, reaching a high of $119.5 per barrel, which was around 65% above its pre-war level.
However, since US President Donald Trump announced that the ceasefire had ended and fighting between the US and Iran resumed on July 8, Brent has gained about 24% over roughly three weeks. The price climbed by about 14% during the week beginning July 20, briefly topping $102 per barrel on Thursday before falling nearly 4% on Friday to trade below $97.
Analysts say the more moderate price increase reflects the absence of physical supply disruptions, ample global inventories, and large volumes of crude already at sea. They also believe that Trump's announcement that he intends to seek another term in 2028 has increased the political significance of November's midterm elections, focusing on potential measures by his administration to keep gasoline prices under control.
Homayoun Falakshahi, head of crude oil analysis at Kpler, said that record volumes of crude held at sea following the reopening of the Strait of Hormuz in June, together with China's large crude inventories, have provided a significant short-term buffer. He also noted that expectations of Trump's administration preventing a sharp rise in oil prices ahead of the midterm elections are helping to curb speculative buying.
Fereydoun Barkeshli, president of the Vienna Energy Research Institute, said oil markets have entered an unusually speculative period, with investors continuing to price in an eventual normalization of supply rather than a prolonged disruption. He noted that market participants are reluctant to cope with this crisis and there is suspicion that paper trading is being manipulated in a manner that caps prices.
Aaron Kildow, Sparta's commodity owner for crude oil, said the Trump administration has few realistic tools to bring down gasoline prices before the midterm elections. He stated that restricting exports of refined petroleum products could theoretically increase domestic fuel supplies but would risk disrupting fuel availability for US allies and carry significant unintended consequences.