Here's a look at what happened in oil markets in the week of July 20-24 and what the focus will be in the days to come.
OVERVIEW: Oil prices retreated sharply on Friday but remain on track for a weekly gain of nearly 10%, as traders continue to monitor shipping disruptions in the Middle East. Brent crude fell back to around $95 a barrel, while West Texas Intermediate traded near $88 a barrel. Earlier this week, the global benchmark briefly climbed above $100 a barrel for the first time in two months after Yemen's Iran-backed Houthis escalated tensions by declaring a blockade on Saudi oil shipments through the Red Sea.
MACRO: Markets are assessing developments in the Middle East conflict and their implications for inflation ahead of the Federal Reserve's meeting next week, when policymakers are widely expected to keep rates unchanged. Traders are currently pricing in about an 80% chance of a hike in September, according to the CME FedWatch Tool.
Meanwhile, the U.S. said it will impose tariffs ranging from 10% to 12.5% on its major trading partners as part of a new set of duties meant to replace President Trump's temporary 10% global tariff.
GEOPOLITICAL RISKS: The week kicked off with Houthis threatening Saudi traffic through the Bab al-Mandeb Strait, which has become significantly more important since the start of the Iran war. The route has been a critical outlet for Saudi oil exports, as the kingdom redirected most of its crude via the East-West pipeline to the Red Sea export terminal of Yanbu.
Houthi threats in the Red Sea could force some vessels to reroute, increasing shipping costs and complicating logistics, but analysts say they are unlikely to halt Saudi exports. Oil shipments from Yanbu can still reach global markets via the Suez Canal. Meanwhile, the scope of the blockade remains uncertain, as some Chinese-flagged tankers have passed through the Bab al-Mandeb Strait without incident, according to Capital Economics.
Beyond the Middle East, the market is also assessing the impact of Ukraine's expanding drone campaign against Russian energy infrastructure. Kazakhstan was forced to suspend piping crude through the Caspian Pipeline Consortium route to Russia's Black Sea export terminal at Novorossiysk, adding another layer of uncertainty to global oil supplies.
SUPPLY AND DEMAND: The key concern is that the oil market is at risk of returning to the tight conditions seen at the peak of the war, but with a much smaller supply buffer. Although several mitigating factors--most notably weaker Chinese import demand--have so far helped to contain the rally, global oil inventories have continued to decline at a pace that is consistent with further upward pressure on prices. Meanwhile, tightness in refined fuel markets continues to intensify.
WHAT'S AHEAD: Analysts have pushed back their expectations for a return to normal conditions in the Middle East oil market: the base case has shifted toward a more prolonged period of military strikes, intermittent negotiations, and constrained shipping flows before oil production and exports can fully recover.
Next week, investors will focus on a busy U.S. economic calendar for fresh clues on the outlook for interest rates. Key releases include consumer confidence, weekly jobless claims, GDP, and the Fed's preferred inflation gauge, the core PCE price index. Markets will also closely watch Fed Chairman Kevin Warsh's press conference following the Fed's policy meeting for any signals on the timing and pace of future rate cuts.
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
July 24, 2026 13:00 ET (17:00 GMT)
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