WTI traded near $85.00 on Monday, up 2.5% after opening around $84.00 and briefly pushing to just under $86.00, while remaining inside August’s range. US forces struck two Iranian rocket launchers on Larak Island, and Iran responded with missile and drone attacks on two air bases in Jordan, yet no production loss was reported and no missing barrel was confirmed. The focus shifted to transit risk: visible commodity vessels moving through the Strait of Hormuz fell to roughly five a day over the weekend, after US Central Command cleared sea mines from international shipping lanes the prior week, while British maritime authorities said a tanker was hit by a projectile on an inbound run on Saturday. Before the war began at the end of February, about a fifth of global crude oil moved through the strait.
Claims about damage to Kharg Island lacked independent confirmation, while bank estimates put Gulf exports at roughly 15 million to 16 million barrels a day, up from a 5 million to 6 million trough in March but below a prewar 22 million to 24 million. The US Treasury sanctioned close to 60 entities, individuals and vessels on Monday, and officials signalled further secondary packages roughly weekly. Macro pricing moved too: September Federal Reserve hike odds rose to near 60% from roughly 35%, with ISM manufacturing PMI prices paid forecast at 72 versus 71.1 prior and services last at 70.3; August payrolls are forecast at 58K after a 23K contraction, with earnings seen at 0.3% MoM from 0.1%, and private payrolls forecast at 47K. Technical levels cited resistance just below $86.00, then $86.50 and $87.00, with support near $83.50, the 50-day EMA near $82.00, the 200-day EMA near $78.50 and a base near $74.00; Stoch RSI was near 75, and invalidation was set on a daily close below $82.00.
WTI Price Bump Driven by Transit Risk, Not Supply Shock
We should recognize that the recent jump in WTI crude to around $85.00 is a reaction to shipping risks rather than actual lost production. Although US strikes on Iranian launchers on Larak Island and subsequent retaliations in Jordan grabbed headlines, not a single barrel of physical supply has been lost. We must focus on the transit threat in the Strait of Hormuz, where daily vessel crossings have plunged to just five over the weekend.
The Strait of Hormuz historically handles more than 20 million barrels per day, which is roughly 20% of global petroleum liquid consumption. Currently, Gulf exports are holding steady at 15 to 16 million barrels per day, showing that physical supplies are still flowing despite the rising geopolitical noise. We should treat the current 2.5% price bump as a temporary risk premium rather than a permanent supply shock.
Sanctions, Macro Data, and Tactical Positioning
We must pay closer attention to the tightening web of US Treasury sanctions rather than military skirmishes that make the news. The US recently blacklisted nearly 60 entities, and weekly secondary sanctions are expected to follow. These administrative measures will slowly constrict actual supply over the coming months, creating a lag that we can exploit as the market slowly digests the paperwork.
We need to prepare for a major economic feedback loop this week with the upcoming ISM manufacturing and services data. Higher energy prices are driving up manufacturing prices-paid expectations to 72, which pushes the odds of a September Federal Reserve rate hike to 60% following the Jackson Hole keynote. This stronger rate outlook will boost the US Dollar, which historically caps oil prices and prevents WTI from sustaining a runaway rally.
We should maintain a tactical bullish bias as long as WTI holds above the support floor of $83.50. If this level holds, our near-term upside targets sit at $86.00 and $86.50, just below the stubborn August ceiling of $87.00. However, we must place tight stop-losses, as a daily close below the 50-day moving average of $82.00 will invalidate this bullish setup.
