Oil Prices Surge Above $90 as Trump's Iran Strike Warning Sparks Geopolitical Fears

Crude oil prices surged above $90 in late July 2026 after US President Trump warned of an impending strike on Iran. The sudden price jump, exceeding an 8% intraday move, is a classic example of geopolitics overriding market fundamentals.

Historically, such large single-session moves are associated with genuine supply disruption events. However, in this case, the market's response was driven by a shift in the probability distribution of potential disruption outcomes rather than actual supply shortages.

The Strait of Hormuz, a critical waterway that handles roughly one-fifth of the world's total energy shipments, is particularly vulnerable to supply chain disruptions. The narrow passage, approximately 33 kilometers wide at its tightest point, represents the only viable deep-water exit from the Persian Gulf for tanker-class vessels.

The US sanctions on Iranian entities involved in levying transit charges on vessels passing through the Strait of Hormuz added a parallel mechanism for supply constraint, further increasing transaction costs for oil transportation.