Brent crude recorded its first weekly rise in almost a month, with the front contract ending up 0.18% at $72.12/bbl. However, prices then came under pressure after tanker movements through the Strait of Hormuz continued and OPEC+ agreed to relax supply curbs by 188,000 barrels/day from August. The backdrop also includes ongoing Ukrainian strikes on Russian oil infrastructure, which adds uncertainty around export logistics rather than output alone.
Iran has indicated it will introduce “service fees” on vessels transiting Hormuz through its territorial waters once a 60-day negotiating period, triggered by the signing of an Iran–US memorandum of understanding, expires. The measures could create differentiated pricing and access terms based on geopolitical alignment, with the United States and China positioned as the main poles and Iran and the UAE aligned on opposite sides. The article was produced with the assistance of an AI tool and reviewed by an editor.
Volatility And Opportunity In The Oil Market
We see conflicting signals in the oil market which create opportunity. The decision by OPEC+ to increase supply starting in August would normally suggest lower prices. However, with ongoing disruptions in the Persian Gulf and Ukraine, getting that oil to market remains the real challenge.
This tug-of-war between supply announcements and physical supply risks means we should trade volatility, not direction. The Cboe Crude Oil Volatility Index (OVX) has already climbed over 15% in the last two weeks of June, touching 45 as uncertainty grows. We believe strategies like buying straddles on Brent futures will perform well as a significant price swing becomes more likely.
Geopolitical Shifts And Fragmentation Of Oil Pricing
The primary catalyst to watch is Iran’s plan to charge “service fees” for passage through the Strait of Hormuz. The deadline for this is fast approaching in mid-August, and it seems clear that favorable terms will be offered to China and its allies. This will create a formal split in the global oil market, ending the era of one price for everyone.
This divergence is already showing up in the price spreads between benchmarks. The premium for Brent crude over West Texas Intermediate (WTI) has widened to more than $7, a gap not seen since the shipping disruptions of early 2025. We anticipate this spread will widen further as geopolitical risks for seaborne oil are priced in.
We are essentially preparing for a return to a market structure similar to the 1970s, with different pricing systems for different geopolitical blocs. The price you pay for oil will increasingly depend on which camp you are in. This fragmentation is the most important trend for us to position for in the coming weeks.
