West Texas Intermediate crude for October was up about 2.3% on the day, while October gasoline futures gained roughly 0.5%, extending a two-day advance. Prices rose to fresh recent highs as investors priced a renewed risk of disruption to Middle East energy flows, after attacks involving the US, Iran and Iran-aligned groups escalated around the Strait of Hormuz.
Key takeaways
- Price move: October WTI crude climbed about 2.3%, while October RBOB gasoline rose about 0.5%.
- Catalyst: Fresh hostilities in and around the Strait of Hormuz—along with renewed strikes across the wider Middle East—boosted supply disruption risk.
- What supports crude: The International Energy Agency warned that the global supply deficit could worsen, with inventories expected to fall faster than previously estimated.
- What limits upside: Evidence of additional Persian Gulf exports and OPEC’s planned production increase for September added counterweight to geopolitical fears.
- Implication: The market is balancing heightened shipping and production risks against the prospect of incremental supply returning from major producers.
What drove the move
Crude prices moved higher for a second consecutive session after reports that two oil supertankers were struck by projectiles while trying to exit the Strait of Hormuz late Monday. The attack cycle intensified after the US targeted Iranian rocket launchers preparing to deploy mines in the strait, followed by Iran’s retaliation with missiles and drones aimed at US air bases in Jordan and the United Arab Emirates.
US and regional actions continued to shape expectations. President Trump said the US naval blockade on Iranian ports is applying pressure and offered no timeline for resolving the US-Iran conflict. Separately, Axios reported that Trump is weighing limited strikes intended to prevent Iran from rebuilding capabilities. The prospect of prolonged military posturing kept a geopolitical risk premium in crude.
Middle East developments beyond the strait also mattered. Fresh Israeli attacks on Iran-backed Hezbollah in Lebanon and strikes on Iran-backed Hamas in Gaza, along with reported attacks by Yemen-based Houthis on shipping in the Red Sea, sustained concerns that conflict escalation could broaden and disrupt routes used to move crude and refined products.
Support from energy supply expectations
Commodity analysts also cited a deterioration in the supply-demand balance. According to the International Energy Agency, released in its monthly report on August 12, the global oil supply deficit is expected to worsen even as war-related conditions and high prices weigh on demand. The IEA projected that global oil inventories would fall in the third quarter at roughly twice the previously estimated rate, attributing the shift to ongoing disruptions linked to the US-Iran conflict.
Crude also received support from concerns about potential knock-on effects to Russian output. A Bloomberg News report said Russia is preparing to escalate attacks on Ukraine after concluding that negotiations for a peace deal have reached a dead end. In response to intensified Ukrainian drone attacks, Russian oil infrastructure has faced growing pressure, which has already reduced crude-processing capacity and exports, according to analytics cited in the report.
Separately, Reuters reported that Russia’s gasoline production fell to about 80,000 tons per day in August—around 70% of domestic demand—raising the risk of supply shortfalls at home.
Market reaction: supply risks vs. incremental barrels
Despite the bullish impulses from geopolitics, gains were not described as unchallenged. Signs that additional oil is leaving the Persian Gulf helped keep a lid on prices. Goldman Sachs said oil exports from the Persian Gulf have risen to roughly 15 million to 16 million barrels per day, about two-thirds of pre-war levels, suggesting some normalization in flows even amid heightened tensions.
Further, OPEC’s forward plan added uncertainty about the durability of the upward move. On August 2, OPEC delegates approved a final production increase of 188,000 barrels per day for September, bringing the group’s output back to the full 1.65 million barrels per day supply cut it had restored in 2023. OPEC indicated it intends to hold output steady for the remainder of the year after the September adjustment. The plan could be difficult to execute if US-Iran military actions intensify, but the stated increase kept expectations anchored.
Data points investors are watching
In the background, weekly inventory and production data signaled a mixed picture for US supply and product balances. The most recent EIA update cited in the article showed US crude oil inventories as of August 21 were about 1.3% above the seasonal five-year average, while gasoline inventories were about 5.9% below and distillate inventories were about 14.6% below their respective seasonal benchmarks.
The same EIA summary indicated US crude production edged slightly higher to about 13.843 million barrels per day in the week ending August 21. Baker Hughes data referenced in the article pointed to a decline in active US oil rigs in the week ended August 28, dropping by five to 447 rigs.
Shipping data also pointed to constrained oil storage capacity remaining a theme. Vortexa reported that crude oil stored on stationary tankers for at least seven days rose about 7.1% week over week to 107.58 million barrels in the week ended August 28.
Bigger picture
As the market re-prices near-term disruption risk, the key question for investors is whether military escalation translates into sustained constraints on shipping and production—or whether supply flows adjust quickly enough to cap prices. The latest move in WTI and gasoline reflects that tug-of-war, with IEA-flagged inventory declines and Russia-related infrastructure concerns supporting prices, while rising Persian Gulf exports and OPEC’s planned output increase temper the upside.
Traders will likely focus next on further developments around US-Iran hostilities and shipping through the Strait of Hormuz, alongside upcoming OPEC-related updates and additional inventory and production data from the US. Any new signals from the Fed and broader macro conditions could also influence commodity demand expectations indirectly through the dollar and interest-rate outlook.
